Australia: Inflation still a narrow phenomenon

Research evidence excerpt

Australia: Inflation still a narrow phenomenon

J P M O R G A N Economic Research

29 July 2026

Australia: Inflation still a narrow

phenomenon

Australia's 2Q CPI report was on the softer side of already-revised expectations in Australian and New Zealand Interest

2Q, crystallizing a material undershoot vs RBA core/headline forecasts. Though Rate Strategy

we expect the leadership will continue to hold a hiking bias while spot %oya Ben K Jarman

inflation is high in coming meetings, the data support our call that the hiking cycle (61-2) 9003-7982

is over and the next move is down in 2027. ben.k.jarman@jpmorgan.com

J.P. Morgan Securities Australia Limited

Headline CPI was 0.6%q/q, under JPM/consensus (0.8%/0.7% respectively),

owing to a particularly benign June monthly (-0.1%m/m). This is materially lower

than the RBA's May SoMP forecast of 1.4%q/q, and importantly this isn't just due

to lower oil prices, as trimmed mean also came in softer at 0.8%q/q vs RBA

expectations of 1.0%q/q. Bottom-up replication of the trimmed mean from the

monthly data indicates that %3m/3m core was 0.77% (charts), annualizing back

near the top of the target band. This measure has been consistently easing since

3Q25 and registered its lowest reading since July last year, when the RBA was still

cutting.

Our research has flagged 1) that the RBA hikes have been front-footed, in the sense

that inflation/inflation expectations risk was not fundamentally high (here and

here), and 2) that CPI has been tracking under RBA forecasts, for 2Q in particular.

Today’s data play to those themes in showing that the shift to above the target band

over the last year has been driven by relatively narrow channels in goods and

energy. Despite fears that Middle-East-related supply shocks are feeding through