The latest RBA Weighted Median CPI for Australia recorded a 1.00% quarter-on-quarter increase in October 2025. This figure notably exceeded market expectations of 0.80% and reversed the downward trend seen in the previous two quarters (0.60% in July and 0.90% in April). Over the past year, the average quarterly increase has been approximately 0.83%, placing the current reading above the 12-month average and signaling renewed inflationary momentum.

Drivers this month

• Shelter costs contributed 0.22 percentage points (pp), reflecting rising rents and housing services.
• Energy prices added 0.15 pp, influenced by global oil price volatility.
• Food inflation remained elevated, adding 0.18 pp.
• Used car prices moderated, subtracting -0.05 pp.

Policy pulse

The 1.00% print remains above the RBA’s inflation target midpoint of 0.75% per quarter, suggesting core inflation pressures have not yet abated. This complicates the RBA’s forward guidance, which had anticipated a gradual easing in inflationary pressures by late 2025.

Market lens

Immediate reaction: The Australian dollar (AUD/USD) appreciated by 0.30% within the first hour post-release, while 2-year government bond yields rose by 12 basis points, reflecting heightened expectations of further monetary tightening.

Core macroeconomic indicators provide essential context for the CPI reading. Australia’s unemployment rate held steady at 3.80% in September 2025, near historic lows, supporting wage growth that feeds into inflation. Wage growth accelerated to 3.50% year-on-year, up from 3.10% six months ago. Consumer spending rose 0.70% in Q3 2025, consistent with resilient demand despite tighter financial conditions.

Monetary Policy & Financial Conditions

The RBA has maintained a hawkish stance since mid-2024, with the cash rate at 4.10%. Financial conditions have tightened, evidenced by rising mortgage rates and subdued credit growth. However, the stronger-than-expected CPI print increases the likelihood of further rate hikes or a prolonged pause at elevated levels.

Fiscal Policy & Government Budget

The Australian government’s fiscal stance remains mildly expansionary, with a 2025-26 budget deficit forecast at 1.20% of GDP. Infrastructure spending and targeted social transfers support domestic demand, potentially sustaining inflationary pressures in the near term.

External Shocks & Geopolitical Risks

Global commodity price volatility, especially in energy and food, continues to impact Australia’s inflation. Geopolitical tensions in the Indo-Pacific region add uncertainty to trade and supply chains, which may exacerbate cost pressures.

Figure 1 illustrates the quarterly Weighted Median CPI trajectory over the past two years, highlighting the recent rebound. The spike in October 2025 contrasts with the subdued prints of early 2025, underscoring the volatility in inflation dynamics.

Market lens

Immediate reaction: Following the print, AUD/USD strengthened by 0.30%, 2-year yields rose 12 basis points, and market-implied RBA rate hike probabilities increased by 15%. This reflects market repricing of a more hawkish RBA stance.

Looking ahead, the inflation trajectory in Australia faces several possible scenarios. A bullish scenario (30% probability) assumes continued global commodity price rises and wage growth acceleration, pushing quarterly core CPI above 1.20% in coming quarters. This would likely prompt the RBA to extend or intensify rate hikes beyond current expectations.

The base case (50% probability) envisions inflation stabilizing around 0.80–1.00% QoQ, supported by moderate wage growth and fiscal stimulus offset by tighter financial conditions. The RBA would likely maintain rates at current levels, signaling a cautious approach.

The bearish scenario (20% probability) involves a sharper slowdown in domestic demand and easing commodity prices, bringing quarterly inflation below 0.60%. This could open the door for rate cuts in late 2026 to support growth.

Structural & Long-Run Trends

Structural factors such as housing supply constraints, labor market tightness, and evolving consumer preferences continue to underpin inflation resilience. Long-run trends toward digitalization and automation may moderate inflationary pressures but have yet to offset current cost-push factors.

The October 2025 RBA Weighted Median CPI reading of 1.00% QoQ signals that inflation remains a key challenge for Australia’s economy. Despite tightening monetary policy and fiscal prudence, core inflation pressures persist, driven by shelter, energy, and wage growth. Financial markets have reacted swiftly, pricing in a more hawkish RBA outlook. External risks and geopolitical uncertainties add complexity to the inflation outlook.

Policy makers face a delicate balancing act between containing inflation and supporting growth. The coming quarters will be critical in determining whether inflationary pressures ease sustainably or require further intervention. Investors and analysts should monitor wage trends, commodity prices, and global developments closely.

Key Markets Likely to React to RBA Weighted Median CPI QoQ

The RBA Weighted Median CPI is a vital gauge of inflation trends in Australia, influencing monetary policy and financial markets. Several tradable assets historically track this indicator closely, reflecting sensitivity to inflation and interest rate expectations.

• AUD: The Australian dollar typically strengthens on higher-than-expected CPI prints due to anticipated rate hikes.
• ASX: The Australian stock index reacts to inflation data through sector rotation and interest rate sensitivity.
• AUDUSD: This currency pair is highly responsive to RBA inflation data, reflecting cross-border capital flows.
• BTCUSD: Bitcoin often moves inversely to inflation surprises, serving as an alternative inflation hedge.
• CBA: Commonwealth Bank of Australia’s stock price is sensitive to interest rate changes driven by inflation data.

Insight: RBA Weighted Median CPI vs. AUDUSD Since 2020

Since 2020, quarterly spikes in the RBA Weighted Median CPI have correlated strongly with AUDUSD appreciation. For example, the 1.30% CPI print in October 2024 coincided with a 2.50% AUDUSD rally over the subsequent month. Conversely, CPI dips below 0.60% have often preceded AUDUSD weakness. This relationship underscores the currency’s sensitivity to inflation-driven monetary policy expectations.

FAQs

What is the RBA Weighted Median CPI QoQ?

The RBA Weighted Median CPI QoQ measures the core inflation rate in Australia, excluding volatile items, on a quarterly basis. It is a key indicator for monetary policy decisions.

How does the latest RBA Weighted Median CPI affect monetary policy?

The higher-than-expected 1.00% reading suggests persistent inflation, increasing the likelihood of further interest rate hikes or a prolonged tight policy stance by the RBA.

Why is the RBA Weighted Median CPI important for investors?

This indicator influences expectations for interest rates, currency strength, and equity market performance, making it crucial for investment decisions in Australian and global markets.

Takeaway: The October 2025 RBA Weighted Median CPI print signals persistent inflation pressures, complicating the RBA’s path forward and prompting markets to price in a more hawkish stance. Vigilance on wage growth, commodity prices, and external risks will be essential in the coming quarters.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.