What is the latest australian inflation rate and why does it matter for RBA interest rates?

January headline inflation was 3.8% year on year and the trimmed mean rose to 3.4%. Both are above the RBA’s 2% to 3% target, which means core pressure is still sticky. When inflation runs hot, the Bank is more likely to tighten policy to protect price stability. That is why markets increased the odds of a May hike after the Australia CPI January release.

What is trimmed mean inflation and how does it guide policy?

Trimmed mean inflation removes the most extreme price moves each month, then averages the rest. It is a better guide to underlying trends than headline CPI, which can swing on fuel or fresh food. The RBA focuses on this measure because it signals persistent pressure. With the trimmed mean at 3.4% in January, policy makers see less progress and may keep a tightening bias.

Which ASX sectors are most exposed if the RBA hikes in May?

A potential hike would likely pressure rate‑sensitive sectors first. A‑REITs, consumer discretionary, and high‑multiple growth stocks are most exposed to rising discount rates. Companies with heavy leverage or weak interest coverage could also feel the pinch. Defensive cash generators and firms with clear pricing power tend to hold up better. Bond‑proxy names may lag if yields push higher on the australian inflation rate staying firm.

What should retail investors watch before the May RBA meeting?

Focus on the next monthly CPI readings, the March quarter CPI, wages, retail sales, and labour market data. Pay special attention to rents, electricity, insurance, and other services, since they are driving persistence. If these categories cool, rate pressure may ease. If they broaden, a May move grows likelier. Align portfolios with quality balance sheets, moderate duration, and stable cash flows while the outlook remains uncertain.

Global Market Insights

Australian Inflation February 26: Hot CPI lifts RBA May hike odds

ByHuzaifa Zahoor February 25, 2026February 25, 2026

The australian inflation rate stayed hot in January, holding at 3.8% year on year while trimmed mean inflation rose to 3.4%. That beat expectations and keeps RBA interest rates in focus for a possible May move. Electricity bills and housing costs were key drivers, adding pressure to sticky services prices. Investors are now pricing higher bond yields and a softer outlook for rate‑sensitive ASX sectors. We explain what the Australia CPI January print means, how policy risks are shifting, and what to watch next.