Reserve Bank signals further rate pain possible to crush persistent inflation

Frustrated mortgage holders are unlikely to get any cash rate relief even as Australia makes progress on inflation.

Ahead of Wednesday’s official inflation figures being released, experts forecast headline inflation will drop from 3.8 to around 3.2 per cent.

But this is largely just timing, with a particularly egregious July 2025 rolling out of the calculation, giving the illusion of progress made on the fight against inflation.

The all-important trimmed mean inflation rate – which the Reserve Bank uses as it cuts out the top and bottom 15 per cent of costs – is expected to improve marginally from 3.6 to 3.5 per cent.

AMP chief economist Shane Oliver said Australia will make progress on headline inflation but it is not the win households would be hoping for.

“We need a significant lower number on a monthly basis given that July last year was so bad,” he told NewsWire.

“It will look better on paper, with the headline inflation rate coming down a little bit, but it certainly won’t be good enough to dampen concerns of a hike.”

Mr Oliver said the July figure is a little “academic”, as it is unlikely to sway the Reserve Bank in either direction ahead of their September meeting.

In its August meeting the RBA ultimately held the cash rate at 4.35 per cent despite stating inflation is too high.

So far the RBA has lifted the cash rate at three of its five meetings in 2026 by a total of 75 basis points in its fight against inflation.

The RBA says these interest rate hikes will slowly bring inflation back towards target.

Australia’s trimmed mean inflation rate – which strips out the top and bottom 15 per cent – came in at 3.60 per cent for the 12 months to June. Headline inflation was 3.8 per cent.

The Reserve Bank risks losing some credibility if it does not proceed with rate hikes to get rid of Australia’s inflation problem.

Creditability of the central bank is based on Australians believing the central bank can achieve its 2 to 3 per cent inflation target.