The RBA's August forecasts sketch a gradual return to the 2–3 per cent target band, with underlying inflation not expected to reach the midpoint until 2028, and the picture has shifted since those numbers were finalised.

For many households, the question about inflation is no longer technical. It is simply: when will price rises stop feeling unusual? Governor Michele Bullock gave a sense of how long the problem has lasted at her 29 September media conference, noting that inflation has been outside the target for about six years, apart from a brief return to the band in 2025.

The most detailed answer to "when" sits in the Statement on Monetary Policy (SMP) published in August 2026, which sets out the central bank's forecasts in six-month steps out to the end of 2028. Those forecasts were finalised on 5 August, before the Monetary Policy Board raised the cash rate target by 25 basis points to 4.60 per cent on 29 September. Reading them year by year shows both the expected path and why it should be treated as a guide rather than a timetable.

Where inflation stands today

Two families of measures matter, and they tell slightly different stories.

  • Headline CPI (all groups): 4.0 per cent over the year to August 2026 on the monthly measure, and 3.9 per cent over the year to the June quarter 2026.
  • Trimmed mean (underlying inflation): 3.6 per cent over the year to the June quarter 2026.
  • Weighted median: also 3.6 per cent in the June quarter.
  • CPI excluding volatile items: 4.0 per cent in the June quarter.

Headline CPI captures every price in the basket, including those that swing sharply, such as fuel. The trimmed mean strips out the largest rises and falls each period to show the more persistent trend. The 4.0 per cent August figure is a headline measure, not an underlying one.

Against that, the target is 2–3 per cent, with a midpoint of 2.5 per cent. Bullock said underlying inflation had been running at about 3.5 per cent over the past six months. She also offered a practical rule of thumb: quarterly inflation of about 0.6 per cent is consistent with roughly 2.5 per cent a year, which she contrasted with quarterly rates of 0.8 per cent and 1 per cent.

The forecast path, half-year by half-year

Table 3.1 of the August SMP sets out the following year-ended forecasts for headline CPI and the trimmed mean:

  • June 2026: headline 3.9 per cent; trimmed mean 3.6 per cent
  • December 2026: headline 3.6 per cent; trimmed mean 3.3 per cent
  • June 2027: headline 2.8 per cent; trimmed mean 3.0 per cent
  • December 2027: headline 2.6 per cent; trimmed mean 2.6 per cent
  • June 2028: headline 2.4 per cent; trimmed mean 2.4 per cent
  • December 2028: headline 2.4 per cent; trimmed mean 2.4 per cent

In words, the SMP expected headline inflation to be back inside the 2–3 per cent range by early 2027, and then to sit at or a little below the midpoint through 2028. Underlying inflation was expected to take longer, declining "to the midpoint of the 2–3 per cent target range in 2028".

One detail stands out. In the June 2027 forecast, headline inflation (2.8 per cent) sits below the trimmed mean (3.0 per cent). In other words, the forecasts implied that the broad, persistent part of inflation, captured by the trimmed mean, would be slower to settle than the headline rate, which is why it is worth watching both measures rather than headline CPI alone.

So, on the August numbers, the answer to "when will inflation feel normal?" was roughly: headline inflation back in the band during 2027, and underlying inflation near 2.5 per cent in 2028.

Why that timetable may have moved

The forecasts came with an assumed path for the cash rate of 4.3 per cent in June 2026, rising to 4.4 per cent in December 2026 and 4.5 per cent through 2027, before easing to 4.4 per cent in 2028. The actual cash rate target is now 4.60 per cent, above every point on that assumed path.

That gap reflects how the outlook changed between August and September. According to the minutes of the September meeting:

  • July inflation data were stronger than expected, particularly for market services.
  • Domestic petrol and diesel prices were 13 per cent higher than forecast in August.
  • Staff expected underlying inflation in the September quarter to be higher than forecast in August.
  • The August forecasts had required several favourable developments that no longer appeared likely to all occur.

The Board's statement said some of the upside risks flagged in August had materialised, including a broader conflict in the Middle East, higher global energy prices and AI-related demand pushing up technology goods prices. It concluded that further tightening was warranted to return inflation to target in a reasonable period.

Bullock was candid about the uncertainty. Asked whether the latest move would be sufficient, she said: "Now, will it be enough? I don't know." She also noted that rate changes take about 12 to 18 months to have their full effect, which means the full effect of the September decision is not expected to be felt until well into 2027.

What to watch next

The next scheduled readings will update the year-by-year picture. The next CPI release is due on 28 October 2026, and the next cash rate update is scheduled for 2.30 pm on 3 November 2026. The RBA calendar also lists a new Statement on Monetary Policy for November, which would be the first full forecast round since the September increase.

The Board has not committed to a particular path. Its statement said it "will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions", and Bullock told reporters: "I'm not going to give you forward guidance."

The bottom line

On the RBA's August forecasts, headline inflation was expected back in the 2–3 per cent band by early 2027 and underlying inflation was expected to reach the 2.5 per cent midpoint in 2028. Since then, inflation has run hotter than forecast and the cash rate has been raised above the level the forecasts assumed. The November forecasts will show whether the central bank's year-by-year answer has changed. Forecasts are estimates, not promises, and households weighing financial decisions may wish to seek licensed professional advice suited to their circumstances.