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Macro Score 72 Bearish

Australian Inflation Hits Two-Year High Despite Beating Market Forecasts

Apr 29, 2026 01:54 UTC
AUD=X, ASX:XJO
Short term

First-quarter inflation rose to 4.09%, coming in below economist expectations of 4.2%. The persistent price pressure increases the likelihood of further rate hikes by the Reserve Bank of Australia.

  • Inflation rose to 4.09% in Q1, the highest in over two years
  • Actual inflation was lower than the 4.2% expected by analysts
  • RBA cash rate is currently 4.1% following the March hike
  • Inflation remains above the RBA's 2%–3% target range
  • Q4 GDP growth reached 2.6%, beating expectations
  • Geopolitical risks and oil prices cited as primary inflation drivers

Australia's inflation rate climbed to 4.09% in the first quarter, marking the highest level seen in over two years. While the figure was slightly lower than the 4.2% forecast by Reuters-polled economists, the trend remains stubbornly above the central bank's target range. This data arrives just ahead of the Reserve Bank of Australia's (RBA) upcoming policy meeting. The RBA previously raised the cash rate to 4.1% in March, the highest level since April 2025, as it struggles to contain price growth. Governor Michelle Bullock and the RBA board have indicated that rates may need to rise further to bring inflation back within the 2%–3% target range. Minutes from the March meeting revealed that policymakers view current inflation as too high, suggesting that a near-term increase may be necessary. External pressures continue to complicate the outlook. The central bank noted that geopolitical instability in the Middle East and rising oil prices pose significant risks, potentially prolonging the period of elevated inflation. Adding to the monetary pressure, Australia's broader economy showed strong momentum. GDP grew 2.6% year-on-year in the fourth quarter, representing the fastest growth pace in two years and exceeding market expectations. This economic resilience may provide the RBA with further justification to maintain a hawkish stance.

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