Resurgent Inflation: Australia’s CPI Jump Puts RBA Rate Hikes Back on the Table
Australia’s battle with inflation took an unexpected turn in late 2025. According to the latest data from the Australian Bureau of Statistics (ABS) released on Wednesday, January 28, 2026, the Consumer Price Index (CPI) rose 3.8% in the 12 months to December.
This jump from November's 3.4% reading has shattered hopes for a "cooling period" and significantly shifted the outlook for Forex Trading. For those watching the Australian Dollar (AUD), the hot CPI print means the Reserve Bank of Australia (RBA) may be forced to hike interest rates as early as their next meeting on February 3, 2026.
The Heat Map: Where Are Prices Rising?
The 3.8% headline figure was driven primarily by essential costs that hit household budgets the hardest. At the GME Academy, we focus on these "stickier" categories because they often dictate central bank policy.
Housing (+5.5%): The primary driver of inflation, fueled by skyrocketing rents and the exhaustion of state-level electricity rebates in Queensland and Western Australia.
Recreation and Culture (+4.4%): Driven by a surge in domestic holiday travel and accommodation during the Christmas season.
Food and Non-Alcoholic Beverages (+3.4%): Sustained pressure on grocery prices continues to squeeze discretionary spending.
Trimmed Mean: The RBA’s "Casting Vote"
While the headline CPI gets the news coverage, professional traders at Global Markets Eruditio look at the Trimmed Mean Inflation. This measure strips away volatile price swings (like fuel and fruit) to show the underlying trend.
In December, the trimmed mean rose to 3.3%, up from 3.2% in November. Because this figure remains well above the RBA’s 2–3% target band, it gives Governor Michele Bullock less room to stay "on hold." Market analysts have quickly pivoted, with many now pricing in a 60% chance of a 25-basis-point rate hike next week.
Forex Impact: AUD/USD Hits 15-Month Highs
In Forex Trading for Beginners, higher inflation often leads to a stronger currency because it implies higher interest rates. Following the CPI release, the Australian Dollar (AUD) surged, touching levels above 0.7000 against the US Dollar—a level not seen since February 2023.
Why the "Aussie" is Rallied:
Rate Differentials: As the US Federal Reserve moves toward a "cutting bias," the RBA is moving toward a "hiking bias," making the AUD more attractive to yield-seekers.
Commodity Strength: Rising prices for gold and critical minerals are providing a natural floor for the Australian economy.
Labour Market Resilience: With unemployment at a low 4.1%, the Australian economy appears "hot" enough to handle higher borrowing costs.
The GME Analysis: A "Sticky" 2026
The December CPI print confirms that inflation in Australia is "sticky"—meaning it is proving harder to bring down than in other G20 nations. The transition to a "complete" monthly CPI model by the ABS has provided more transparency, but also more volatility for traders to navigate.
As the RBA prepares for its first board meeting of 2026, the question is no longer if they will act, but how many hikes will follow this year. For traders, this creates a "Buy the Rumor" environment for the AUD, but carries the risk of a "Sell the Fact" pullback if the RBA remains more cautious than the market expects.
Master the RBA Interest Rate Cycle
The Australian Dollar is one of the most exciting currencies to trade in 2026 due to its high volatility and direct link to commodity markets. Don't let a "Hot CPI" catch you on the wrong side of a trade.
Ready to Trade the AUD Breakout? Understanding the relationship between CPI, trimmed mean, and RBA policy is the key to consistent profits in the Aussie crosses.
Join our FREE Forex Workshop. Learn how to use "Fundamental Anchors" to trade interest rate decisions and identify the best entry points for AUD/USD, AUD/JPY, and EUR/AUD.
