Monthly CPI rose 3% in year to August; NAB pushes back rate cut call
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More news: NAB economists have pushed back their next rate cut call from November 2025 to May 2026 following the release of slightly hotter-than-expected monthly inflation data.
"We now see the RBA on hold at 3.6% until May (previously cuts in November and February)," the bank's economists said in a note.
The monthly CPI indicator suggests a 0.9% to 1% quarterly outcome for the third quarter trimmed mean inflation, which they said would be a 0.3 percentage point upside surprise to the RBA's current forecasts.
"The detail shows that market services inflation is significantly hotter than we expected," the NAB economists said.
"For the RBA, this means considerably less certainty that inflation has settled near 2.5% and highlights the likelihood that it will take a period of modestly restrictive policy for inflation to settle at 2.5%."
CreditorWatch chief economist Ivan Colhoun is also warning that interest rate cuts are now “unlikely in 2025” unless inflation markedly improves or unemployment worsens.
But HSBC chief economist Paul Bloxham noted the RBA itself is “not putting very much weight” on this indicator due to its volatility. He has maintained his call for 25 basis point cuts in November and February but flagged “some risk of fewer cuts”.
AMP deputy chief economic Diana Mousina has also maintained expectations for three more cuts in November, February and May, down to 2.85%.
ANZ economists are eyeing the data with a touch of concern for its quarterly inflation prediction, noting “upside risk”.
“All this together means the case for lower interest rates may end up less compelling than market pricing suggests,” they said in a note.
Monthly CPI rose 3% in year to August
The news: The monthly consumer price index indicator jumped 3% in the year to August, up from 2.8% in the 12 months to July.
This was a touch higher than the 2.9% economists were expecting.
The numbers: The largest contributors to the price rise were housing, up 4.5%, food and non-alcoholic beverages, up 3%, and alcohol and tobacco, up 6%.
The annual trimmed mean inflation was 2.6% to August, down from 2.7% in July.
CPI excluding items and holiday travel was up 3.4% on an annual basis, compared to a 3.2% rise in July.
Electricity costs were up 24.6% over the 12 month period.
The context: This is the final significant data release before the Reserve Bank board meets next week to make its September rate decision. The majority of economists expect the central bank to keep rates on hold.
A full quarterly dataset for inflation is due to be published in late-October, with the RBA preferring the more comprehensive dataset over the volatile monthly information. This monthly dataset will be replaced with a comprehensive monthly figure from November, in a move RBA governor Michele Bullock has supported.
What they said: "The annual rise in electricity costs is primarily related to households in Queensland, Western Australia and Tasmania having higher out-of-pocket costs in August 2025 than they did in August 2024," said ABS head of prices statistics Michelle Marquardt.
"In August last year, State Government electricity rebates were in place for Queensland ($1000), Western Australia ($400) and Tasmania ($250)," she said.
"Over the year, those rebates have been used up and those programs have finished. Excluding the impact of the various changes in Commonwealth and State electricity rebates over the last year electricity prices rose 5.9%."
The sources: Australian Bureau of Statistics media release, NAB research, CreditorWatch research, HSBC research, AMP research, ANZ research
