Will Australians Have to Wait Until 2028 for Inflation to Cool Down?
Source: Kapitales Research
Highlights:
Inflation is now expected to peak in mid-2026, with underlying inflation at 3.7% and headline inflation at 4.2%, at the time of writing.
The Reserve Bank of Australia stated that current price pressures extend across more sectors and are stronger than previously anticipated.
Inflation is unlikely to return to the midpoint of the 2–3% target range until 2028, despite tight monetary policy.
Inflation Forecast Gets Pushed Back
Reserve Bank of Australia has delivered a sobering update on the country’s inflation outlook, warning that price pressures are likely to remain elevated for much longer than previously expected. In its latest statement, the central bank said inflation is now forecast to peak in mid-2026 and is not expected to return to the midpoint of its 2–3 per cent target range until 2028. At the time of writing, the RBA projects underlying inflation to reach around 3.7 per cent and headline inflation to climb to 4.2 per cent in mid-2026, before gradually easing over the following two years.
Why Are Prices Staying High?
According to the RBA, recent inflation data from the second half of 2025 revealed stronger and broader price pressures than earlier forecasts suggested. The bank said inflation is no longer limited to a few sectors, but is now being driven by wider demand across the economy. In its monetary policy statement, the board noted that while some of the pressure reflects sector-specific factors that may fade over time, there are also deeper capacity constraints in the economy. These include tight labour markets, high service costs, and ongoing supply-side challenges. The RBA added that the economy appears to be operating closer to its limits than previously assumed, which is making it harder for inflation to cool naturally.
What Does This Mean for Interest Rates?
The central bank said the current stance of monetary policy — including previous interest rate increases — should help bring inflation under control over time. However, it made it clear that progress will be slow. The RBA expects the economy to gradually return to balance, with inflation moving closer to the midpoint of the target band by mid-2028, assuming policy settings remain tight enough. For households and businesses, this signals that the cost-of-living squeeze may persist for several more years. Borrowers, in particular, are unlikely to see quick relief, while wage growth and spending patterns will continue to play a key role in shaping the inflation path. In short, Australia’s inflation battle is far from over — and patience may be required well into the decade.
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
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Will Australians Have to Wait Until 2028 for Inflation to Cool Down?
Highlights:
Inflation Forecast Gets Pushed Back
Reserve Bank of Australia has delivered a sobering update on the country’s inflation outlook, warning that price pressures are likely to remain elevated for much longer than previously expected. In its latest statement, the central bank said inflation is now forecast to peak in mid-2026 and is not expected to return to the midpoint of its 2–3 per cent target range until 2028. At the time of writing, the RBA projects underlying inflation to reach around 3.7 per cent and headline inflation to climb to 4.2 per cent in mid-2026, before gradually easing over the following two years.
Why Are Prices Staying High?
According to the RBA, recent inflation data from the second half of 2025 revealed stronger and broader price pressures than earlier forecasts suggested. The bank said inflation is no longer limited to a few sectors, but is now being driven by wider demand across the economy. In its monetary policy statement, the board noted that while some of the pressure reflects sector-specific factors that may fade over time, there are also deeper capacity constraints in the economy. These include tight labour markets, high service costs, and ongoing supply-side challenges. The RBA added that the economy appears to be operating closer to its limits than previously assumed, which is making it harder for inflation to cool naturally.
What Does This Mean for Interest Rates?
The central bank said the current stance of monetary policy — including previous interest rate increases — should help bring inflation under control over time. However, it made it clear that progress will be slow. The RBA expects the economy to gradually return to balance, with inflation moving closer to the midpoint of the target band by mid-2028, assuming policy settings remain tight enough. For households and businesses, this signals that the cost-of-living squeeze may persist for several more years. Borrowers, in particular, are unlikely to see quick relief, while wage growth and spending patterns will continue to play a key role in shaping the inflation path. In short, Australia’s inflation battle is far from over — and patience may be required well into the decade.
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