If you've been hoping for another RBA interest rate cut this year, the economists at Commonwealth Bank of Australia (ASX: CBA) have some bad news for you.
CBA revised its outlook for rate relief Down Under following yesterday's widely unexpected surge in inflation. News which sent the S&P/ASX 200 Index (ASX: XJO) into a tailspin in early afternoon trade on Wednesday.
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What inflation numbers did the ABS report?
The prospect of ASX 200 investors or Aussie mortgage holders seeing another 2025 interest rate cut from the RBA all but vanished yesterday after the Australian Bureau of Statistics (ABS) reported that the Consumer Price Index (CPI) indicator rose 1.3% in the September quarter and 3.2% annually.
That marks the highest quarterly inflation increase since March 2023 and was well ahead of market expectations. The annual inflation print was the highest level since the June 2024 quarter.
As for trimmed mean annual inflation, which removes certain volatile items and is the metric favoured by the RBA, it came in at 3% for the September quarter, up from 2.7% in the June quarter.
This was the first time trimmed mean annual inflation rose since December 2022, and it came in well above the RBA's forecast of 2.6%.
Which brings us to…
What CBA is now saying about RBA interest rate moves
Commenting on the surprise surge in inflation, Belinda Allen, head of Australian economics at CBA, said, "This result will be a genuine concern for the RBA. We expect the central bank to take a more hawkish tone to avoid a return to higher inflation."
The RBA meets next week and announces its interest rate decision on Tuesday. As for that upcoming meeting, CBA said, "We expect the cash rate to be held steady at 3.60%."
Unfortunately for ASX investors patiently waiting until 2026 for the next rate cuts, CBA also believes those are off the table for now.
According to the ASX 200 bank:
Given the material upside surprise to the Q3 25 CPI, and the broad-based nature of pricing pressures, we now expect the RBA to remain on hold from here. Previously we expected one last rate cut in February 2026 to bring the cash rate back closer to neutral.
So, what will it take for Aussie to get some rate relief?
"We expect it would take a material move higher in the unemployment rate, together with more moderate inflation prints, to bring the RBA back to the cutting table," CBA said.
Could, gasp, the next RBA interest rate move actually be higher?
According to CBA, that's certainly a possibility, with the bank noting "the latest data has tilted the risks to the upside".
CBA concluded, "If inflation remains elevated in 2026, as we expect it could, the RBA may need to act."
