Image source: RBA (Facebook), Canva
Not even the most dovish economist had forecast a cash rate cut from the Reserve Bank of Australia's September meeting next week.
All bets were on another 25-basis point cut in November, optimally timed after the delivery of the RBA's preferred inflation data, the quarterly CPI released the week before.
All the big four bank economists were on board with that tidy scenario, amid inflation staying obediently within its 2-3% target range.
But this week's monthly CPI print - data the RBA says we shouldn't put too much stock in - all but blew that scenario out of the water.
On Wednesday, headline inflation for August defied expectations and was back at 3%, its highest annual read for more than a year.
Why is inflation back up?
The data showed prices were up across many categories, including food, housing, transport, electricity, and services.
It should be noted trimmed mean inflation, the RBA's preferred measure that excludes volatile items, dropped to 2.6% in the 12 months to August, down from 2.7% the previous month.
But while the RBA has repeatedly stated it's not too invested in monthly CPI readings, many economists note inflation now looks on track to overshoot the RBA's September quarter forecasts.
To many analysts, this scuppers the broad consensus of a November rate cut and raises the possibility there may be fewer in the current downward cycle - or possibly none at all.
What do the experts say about future cash rate cuts?
In the wake of the data, several banks and investment houses reacted swiftly to adjust their rate cut forecasts.
Of the big banks, NAB scrapped its predicted November and February cash rate cuts while CBA took a more measured approach, saying it was sticking with its forecast November cut for now but it was "not a done deal".
ANZ was on the same page, noting upside risks to a November cut while Westpac is still sticking to its November/February cut schedule for now.
Bond traders immediately pulled back their bets of a rate cut in November, implying less than a 50% chance after previously fully pricing one in.
For now, they're still backing one in February.
But NAB economists say it's unlikely there'll be another cash rate cut until May 2026 - to 3.35% - the last in this downcycle.
What has the RBA said?
As you might expect, the RBA has said nothing about the August inflation print.
However, governor Michele Bullock is on the record - many times - saying the board places little weight on monthly CPI figures.
Next week's board meeting on 29-30 September was always slated as a bit of a non-event but analysts will now be keenly awaiting the post-meeting decision statement, scrutinising it for any whiff of hawkish nuance.
Ms Bullock's requisite post-meeting media conference will also likely attract renewed attention, with journalists lining up to draw out any additional utterance on inflation and what the board might do next.
All - or maybe nothing - will be revealed on Tuesday afternoon.
As they say, stay tuned.
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