CPI eases, but effects of Middle East crisis not baked into data
Australia’s inflation rate eased slightly in February, offering a modest upside surprise for markets but leaving price growth uncomfortably above the Reserve Bank of Australia (RBA)’s target band.
The annual consumer price index (CPI) came in at 3.7% for February 2026, just below consensus expectations of 3.8% and down from the same pace recorded over the previous two months.
Inflation remains outside the RBA’s 2-3% target range, keeping the prospect of rate relief finely balanced.
Automotive fuel prices fell more sharply, dropping 7.2% year-on-year compared with a 2.7% decline previously.
Few will be assuaged by this latest inflation print, having not captured the oil price shock resulting from the US-Israel war in Iran, which has seen petrol prices soar to record highs at the Australian gas pumps.
“We’ll get a better picture of recent inflation trends when the all-important March quarter CPI report is released in late April. That report will also include the recent surge in petrol prices,” said Betashares chief economist David Bassanese.
“As it stands, therefore, it’s still likely that the March quarter inflation report will be uncomfortably high, leaving the Reserve Bank under pressure to raise rates again in May. News of a possible peace deal in Iran can’t come quickly enough,” he added.
Housing costs were also up in February, accelerating to 7.3% from 6.8%, while recreation rose to 4% from 3.6%. Services inflation held at 3.9%, unchanged from January, underscoring persistent underlying price pressures.
The trimmed mean CPI, the RBA’s preferred core measure, edged down to 3.3% year-on-year, just below both January’s print and market expectations of 3.4%. On a monthly basis, headline CPI was flat in February, reversing a 0.4% rise in January.
Discussing today's inflation print, Labor treasurer Jim Chalmers told reporters in Canberra: “It’s pleasing to see that inflation was easing before the war, but we know that inflation was already too high in our economy and the conflict in the Middle East will push inflation higher for longer.
“We understand that the inflationary pressures from the war in the Middle East are very substantial, and we expect to see the consequences of that war push up inflation higher for longer in our economy."
