In March 2025, Australia’s private inflation survey reported an increase of 0.7% month-on-month, compared to a decrease of 0.2% previously, while the year-on-year rate rose to 2.8% from 2.2%.
The Melbourne Institute inflation gauge for the same month recorded a 0.7% month-on-month rise, marking the highest rate since December 2023, with year-on-year inflation also at 2.8%.
Core Inflation Shows Persistent Pressure
The trimmed mean showed a monthly increase of 0.2% and an annual increase of 2.9%.
That recent uptick, shown most clearly through the latest private inflation data, tells us that price pressures in Australia aren’t easing as many had hoped. The month-on-month increase of 0.7%, following a previous fall of 0.2%, indicates more broad-based price growth is taking hold. Year-over-year, the data moving up to 2.8% from 2.2% reflects a firming trend that’s not just noise from one-off factors.
The trimmed mean — often used to filter out volatile swings — also nudged up at both the monthly and annual rates, landing at 0.2% and 2.9% respectively. So even after removing the extremes, inflation remains sticky. This shows that core price growth is quietly maintaining itself above the central bank’s comfort range. It suggests underlying demand remains resilient, whether driven by services, wages, or housing costs.
When the Melbourne Institute published these figures, it wasn’t just updating a chart. It was giving a timely pulse check of inflationary momentum. Their inflation gauge, mirroring that 0.7% monthly rise and matching the 2.8% yearly figure, gives added weight to the idea that price pressures may be building again after a few months of relative calm.
Markets Adjust Rate Cut Expectations
For those positioned in rate-sensitive markets, that adds a layer of near-term clarity. We see this data tilting the probability balance. Rather than supporting a sooner-than-expected rate cut, this points to a central bank that may lean on patience. Recent talk of a dovish pivot could now face greater scrutiny. The probability of another hike remains unlikely, but hopes of rate relief might have to further recede into the second half of the year.
Traders with exposure to short-end contracts should now reevaluate any lingering expectations for early easing. Any mispricing hinged on a rapid softening of inflation needs to be addressed. Additionally, attention will likely turn toward wage data and high-frequency retail figures for any sign of secondary strength. Pricing in stability with one eye on tightening premium might offer more protection than assuming a quick dovish turn remains on the table.
With policy expected to remain steady, we’d expect volatility around front-end yields to stay low, unless fresh surprises arrive. However, the next few readings will be watched with greater focus, as the trend now leans gently higher. The longer inflation remains above the 2.5% mid-point target, the more likely the market is to adjust positioning incrementally, especially in shorter-dated interest rate products. Traders should keep reaction thresholds tight, especially in thinner trading hours.
In the present conditions, inflation-linked instruments may also start to draw more balanced interest. Break-even rates could find a bit more upside if next month’s release confirms this as more than a temporary blip. Medium-term inflation expectations, often slow to react, might shift subtly higher with another reading like this.
