Australia CPI expected to rise to 4.2% in September
- Australian Consumer Price Index seen ticking higher in September
- The Reserve Bank of Australia’s favorite Trimmed Mean CPI is expected to rise 0.3% MoM.
- The Australian Dollar struggles to retain the 0.7000 mark against the US Dollar.
The Australian Bureau of Statistics (ABS) will publish the September Consumer Price Index (CPI) on Wednesday at 00:30 GMT. The report is expected to show that inflation rose 4.2% from a year earlier, higher than the 4% posted in August. The monthly CPI is forecast at 0.7% following the 0.4% print from the previous month.
The ABS will also release the Trimmed Mean CPI, the Reserve Bank of Australia’s (RBA) favorite inflation gauge. The annual figure was 3.6% in August, while the monthly Trimmed Mean CPI is forecast to print 0.3% in September, up from 0.2%.
Ahead of the announcement, the Australian Dollar (AUD) trades a handful of pips above the 0.7000 psychological mark against the US Dollar (USD), as the latter strengthens amid risk aversion and ahead of the Federal Reserve (Fed) monetary policy announcement.
What to expect from Australia’s inflation rate data?
Central banks, including the RBA, base their monetary policy decisions on inflation. Price stability is a critical part of all major central banks' mandates, with some also aiming to keep unemployment tamed. The RBA has two key objectives: keep inflation low and stable, and ensure as many people as possible are in jobs.
The Australian seasonally adjusted Unemployment Rate stood at 4.7% in September, the highest in five years, yet policymakers seem less concerned about unemployment than about inflation. The September monetary policy statement noted that “The unemployment rate was now close to the assessment of full employment embedded in the August forecasts,” while on inflation, members assessed July inflation data, which led the staff to expect higher underlying inflation in the September quarter than had been forecast in August.
“Business liaison and surveys continued to record widespread reports of elevated cost growth and few expectations that those pressures would ease significantly over the year ahead,” the statement adds.
In the September meeting, the Board voted unanimously to increase the official cash rate target by 25 basis points (bps) to 4.6%, while leaving the door open for additional hikes as inflation remains “too high,” according to the minutes.
With that in mind, the upcoming inflation figures should support the case for further interest rate hikes ahead, maintaining the AUD under pressure.
A reading of 4.2% or above should push the AUD/USD pair higher, while if somehow inflation surges past the 4.6% YoY peak posted in March, the Aussie is likely to get a near-term boost. A reading below 4%, on the other hand, should cool hike expectations and push the AUD further south. However, with Oil prices holding near fresh multi-month peaks, the odds of a continued AUD advance are quite limited, specially ahead of the United States Federal Reserve’s (Fed) monetary policy announcement.
The Fed is widely anticipated to keep interest rates on hold, with market participants pricing in a December hike. Still, given Chair Kevin Warsh’s unwillingness to provide forward guidance, a surprise move is always on the table. Even further, the Fed is likely to deliver a hawkish message, which means there are little odds of a USD setback.
How could the Consumer Price Index report affect AUD/USD?
As previously mentioned, inflation is expected to have ticked higher in September, far above the RBA’s range goal of 2% to 3%. Ahead of the announcement, the AUD/USD pair hovers a handful of pips above 0.7000.
Valeria Bednarik, FXStreet Chief Analyst, notes: “From a technical point of view, the AUD/USD pair is neutral-to-bullish according to the daily chart. The pair holds above a flat 20-day Simple Moving Average (SMA) while battling a mildly bearish 100-day SMA at 0.7030. Technical indicators, in the meantime, picked up modestly within positive levels, skewing the risk to the upside.”
Bednarik adds: “The same chart shows that speculative interest is willing to buy on dips towards the 0.7000 figure, the immediate support level. A clear break below it exposes the 0.6930/50 area, ahead of 0.6880, July’s monthly low. AUD/USD would need to run past 0.7070 to gain upward momentum and advance towards its next resistance area at around 0.7130.”
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Economic Indicator
Trimmed Mean CPI (YoY)
The Trimmed Mean Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, is a measure of underlying inflation. The Trimmed mean is calculated using a weighted average of percentage change from the middle 70% of the distribution of all CPI components in order to smooth the data from the more-volatile items. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.
Read more.Next release: Wed Oct 28, 2026 00:30
Frequency: Monthly
Consensus: -
Previous: 3.6%
Source: Australian Bureau of Statistics
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