Australia's January CPI increase exceeded expectations, with core inflation accelerating upward

Investing.com - Australia’s January Consumer Price Index (CPI) inflation exceeded expectations, with core inflation rising, indicating that the Reserve Bank of Australia may raise interest rates further to curb a potential rebound in price pressures by the end of 2025.

Data released by the Australian Bureau of Statistics on Wednesday showed that the overall CPI increased by 3.8% year-on-year in January. This was above the 3.7% forecast and unchanged from the previous month.

Subscribe to InvestingPro for more breaking news on the Australian economy

Core inflation, measured by the trimmed mean CPI, rose 3.4% in January, surpassing the expected 3.3%.

Housing prices were the biggest driver of the CPI increase, as some government electricity subsidies were gradually phased out, causing electricity costs to soar by 32.2%. Rising rents and home prices also contributed to the increase.

Wednesday’s data indicates that Australia’s inflation momentum at the end of 2025 has largely continued into the new year, with high housing costs and increasing supply constraints likely keeping price pressures elevated.

Core inflation further pushed beyond the Reserve Bank of Australia’s 2% to 3% annual target range — a trend that could prompt the central bank to raise interest rates again.

The Reserve Bank of Australia raised rates by 25 basis points in January and warned that if inflation does not cool as forecasted, further tightening of policy will be necessary. The central bank now expects inflation to ease only by 2028, much later than previous projections.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.