Is Inflation in Australia Intensifying? Heres What the Latest CPI Figures Reveal

Source: Kapitales Research

Highlights:

• Inflation Remains Elevated: Australia's Consumer Price Index (CPI) for January 2026 shows a 3.8% year-on-year increase, signaling persistent inflationary pressures.
• Core Inflation Rises: Core inflation metrics, excluding volatile items, also edged higher, indicating underlying price pressures in the economy.
• Interest Rate Hike Speculation: With inflation above the Reserve Bank of Australia’s target range, further interest rate hikes are being considered to control rising costs.

Australian Price Growth Holds Steady — But Core Inflation Rises

In the latest inflation update from the Australian Bureau of Statistics (ABS), consumer prices showed continued upward pressure in January 2026, with the Consumer Price Index (CPI) posting another solid gain. Headline inflation — capturing the broad measure of price changes across goods and services — remained elevated at 3.8% year‑on‑year, roughly in line with the previous month and above the Reserve Bank of Australia’s (RBA) 2–3% target range. Core inflation metrics, which exclude volatile items, increased, indicating ongoing underlying price pressures within the economy.

Monthly Increase and Core Pressures

On a month‑to‑month basis, consumer prices climbed by 0.4% in January, an outcome that surprised some market watchers who were expecting a smaller rise. This monthly uptick reinforced concerns that inflation remains sticky, despite recent interest rate increases aimed at cooling price growth. Core inflation metrics — like the RBA’s trimmed mean — also edged up by 0.3% in the month, pushing the annual rate up to 3.4% from 3.3% in December. This exceeded the expected rate of 3.3% and prompted markets to adjust their outlook, raising the likelihood of a rate hike in May.

What’s Driving the Price Gains?

Several categories contributed noticeably to the inflation picture. Housing costs, particularly rents and utilities, continued to rise sharply, while food, recreation, and culture categories also showed meaningful increases over the year. These cost pressures have combined to keep the overall inflation rate well above the RBA’s comfort zone, complicating the central bank’s policy outlook.

Policy Implications: Interest Rates in Focus

With inflation holding stubbornly above the target band and core inflation picking up, speculation is growing that the RBA may opt for further interest rate hikes in the coming months to rein in price growth. Markets and economists are watching closely as policymakers balance controlling inflation with supporting economic activity amid relatively low unemployment.

Note- All data presented is based on information available at the time of writing.

Disclaimer for Kapitales Research

The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au