Australia: CPI: Downside surprise. We now expect the RBA to remain on hold in 2026 ahead of "normalisation" rate cuts in 2027

Research evidence excerpt

Australia: CPI: Downside surprise. We now expect the RBA to remain on hold in 2026 ahead of "normalisation" rate cuts in 2027

Economics Research

29 July 2026 | 1:35PM AEST

Australia: CPI: Downside surprise. We now expect the RBA to remain on

hold in 2026 ahead of “normalisation” rate cuts in 2027

Bottom line: The RBA’s preferred measure of underlying inflation – the quarterly Andrew Boak, CFA

+61(2)9321-8576 |

trimmed mean – rose 0.81%qoq, corresponding to a year-over-year rate of andrew.boak@gs.com

Goldman Sachs Australia Pty Ltd

3.65%yoy. The outcome was weaker than our and consensus expectations and below

Will Maher

the RBA’s May SMP forecast (GSe: +0.95%qoq; BBG: +0.9%qoq; RBA: +1.0%qoq). The +61(2)9320-1013 | will.maher@gs.com

more timely monthly trimmed mean CPI data were also weaker than expected, with Goldman Sachs Australia Pty Ltd

Oscar Toyear-over-year growth in the trimmed mean CPI increasing to 3.64%yoy (GSe/BBG: +61(2)9320-1367 | oscar.to@gs.com

+3.7%yoy). Compositionally, the breadth of inflationary pressures eased materially, Goldman Sachs Australia Pty Ltd

with the downside miss to our quarterly trimmed mean forecast reflecting

weaker-than-expected inflation across food, new dwelling purchases, and domestic

travel prices.

Ahead of today’s CPI report, we leaned towards a fourth and final RBA rate hike this

cycle in August but characterised this forecast hike as a very close call (GS: 55%

subjective probability) and contingent on an uncomfortably high 2Q2026 CPI report.

Today’s material downside surprise relative to expectations shifts the balance of

risks towards the RBA remaining on hold at 4.35% in August and for the remainder of

2026. Given the weaker signal on underlying price pressures, we also lower our