4.2%: Australia’s CPI Expected to Rise in September

September Australian Consumer Price Index expected to edge higher
0.3% MoM growth is forecast for the Trimmed Mean CPI, the Reserve Bank of Australia’s preferred inflation measure.
0.7000 remains difficult for the Australian Dollar to hold against the US Dollar.

4.2% is the forecast for September’s annual inflation rate. The Australian Bureau of Statistics (ABS) will release the Consumer Price Index (CPI) on Wednesday at 00:30 GMT, with the annual figure expected to exceed the 4% recorded in August. Month-on-month inflation is projected at 0.7%, compared with 0.4% a month earlier.

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Also due from the ABS is the Trimmed Mean CPI, the preferred inflation measure of the Reserve Bank of Australia (RBA). September’s monthly reading is expected to rise to 0.3% from 0.2%. The annual rate stood at 3.6% in August.

With the release approaching, the Australian Dollar (AUD) sits just a handful of pips above the psychological 0.7000 level against the US Dollar (USD). Risk aversion is supporting the USD ahead of the Federal Reserve (Fed) monetary policy announcement.

Australia’s inflation outlook ahead of the release

Inflation informs monetary policy decisions at the RBA and other central banks. All major central banks have price stability as a core mandate, while some also seek to contain unemployment. For the RBA, the two central objectives are low, stable inflation and employment for as many people as possible.

At 4.7% in September, Australia’s seasonally adjusted Unemployment Rate reached its highest level in five years. Even so, policymakers appear more concerned about inflation than unemployment. The September monetary policy statement observed that “The unemployment rate was now close to the assessment of full employment embedded in the August forecasts,” while members’ review of July inflation data prompted staff to expect September-quarter underlying inflation above the August forecast.

The statement also says: “Business liaison and surveys continued to record widespread reports of elevated cost growth and few expectations that those pressures would ease significantly over the year ahead,”

A unanimous Board decision at the September meeting lifted the official cash rate target by 25 basis points (bps) to 4.6%. According to the minutes, inflation remained “too high,” leaving further rate increases possible.

Against that backdrop, the forthcoming inflation data should strengthen the argument for additional interest rate increases, keeping the AUD under pressure.

At 4.2% or higher, the inflation reading should lift AUD/USD. A surprise acceleration beyond March’s 4.6% YoY peak would likely give the Aussie a short-term boost. By contrast, a result below 4% should temper rate-hike expectations and send the AUD lower. Sustained gains in the AUD nevertheless look unlikely while Oil prices remain close to fresh multi-month highs, particularly ahead of the United States Federal Reserve’s (Fed) monetary policy announcement.

An unchanged interest rate decision is widely expected from the Fed, although market pricing anticipates a December increase. A surprise decision cannot be ruled out, given Chair Kevin Warsh’s reluctance to offer forward guidance. The Fed is also likely to strike a hawkish tone, leaving little prospect of a USD retreat.

AUD/USD near 0.7000 ahead of the Consumer Price Index report

As noted above, September inflation is forecast to edge up, remaining well above the RBA’s 2% to 3% target range. AUD/USD is trading only a handful of pips above 0.7000 before the release.

FXStreet Chief Analyst Valeria Bednarik offers this technical assessment: “From a technical point of view, the AUD/USD pair is neutral-to-bullish according to the daily chart. The pair holds above a flat 20-day Simple Moving Average (SMA) while battling a mildly bearish 100-day SMA at 0.7030. Technical indicators, in the meantime, picked up modestly within positive levels, skewing the risk to the upside.”

On the key trading levels, Bednarik says: “The same chart shows that speculative interest is willing to buy on dips towards the 0.7000 figure, the immediate support level. A clear break below it exposes the 0.6930/50 area, ahead of 0.6880, July’s monthly low. AUD/USD would need to run past 0.7070 to gain upward momentum and advance towards its next resistance area at around 0.7130.”

Inflation explained

Understanding inflation

A rise in the cost of a representative basket of goods and services is measured as inflation. The headline measure is typically reported as a percentage change month-on-month (MoM) and year-on-year (YoY). Food and fuel are excluded from core inflation because their prices are more volatile and can respond to geopolitical developments and seasonal influences. Economists concentrate on the core figure. It is also the measure targeted by central banks, whose mandates require them to maintain manageable inflation, generally around 2%.

Understanding the Consumer Price Index (CPI)

Changes in the cost of a basket of goods and services over time are tracked by the Consumer Price Index (CPI). Readings are generally presented as percentage changes month-on-month (MoM) and year-on-year (YoY). Central banks target Core CPI, which removes volatile food and fuel components. A Core CPI reading above 2% typically leads to higher interest rates; a reading below 2% tends to have the reverse effect. Higher rates support a currency, so rising inflation usually strengthens it. Falling inflation generally produces the opposite outcome.

Inflation’s effect on foreign exchange

A country’s currency tends to strengthen when inflation is high and weaken when inflation is low, despite how counter-intuitive that may appear. The reason is the central bank’s usual response: raising interest rates to curb inflation. Those higher rates draw more international capital from investors seeking an attractive return on their funds.

Inflation’s influence on Gold prices

Historically, investors sought Gold during periods of high inflation because it retained its value. They still often buy Gold for its safe-haven qualities during severe market disruption, but this pattern does not hold most of the time. High inflation typically prompts central banks to raise interest rates to bring it under control. For Gold, higher rates are a negative: they raise the opportunity cost of holding the metal rather than an interest-bearing asset or money in a cash deposit account. Conversely, lower inflation tends to support Gold by bringing interest rates down and making the precious metal a more attractive investment alternative.

Economic data indicator

YoY Trimmed Mean CPI

Underlying inflation is tracked by the Trimmed Mean Consumer Price Index (CPI), published monthly by the Australian Bureau of Statistics. Its calculation takes a weighted average of percentage changes across the middle 70% of the distribution of all CPI components, smoothing out the influence of more volatile items. The YoY figure compares prices in the reference month with those in the corresponding month a year earlier. A high reading is generally considered positive for the Australian Dollar (AUD); a low reading is considered negative.

Learn more.

Next scheduled release: Wed 28 October 2026 00:30

Release frequency: Every month

Market consensus: -

Prior reading: 3.6%

Data source: Australian Bureau of Statistics

4.2%: Australia’s CPI Expected to Rise in September

Australia’s inflation outlook ahead of the release

AUD/USD near 0.7000 ahead of the Consumer Price Index report