Inflation update: the September and September quarter numbers a touch stronger than expected and much higher than the RBA’s last projections (August). Headline inflation above 4%. Core inflation above 3.5%. Pretty much locks in a 25bp hike next week. Probably doesn’t add to chances of a 40bp move or a third hike in December. There is some good news in the latest data but it is swamped by the bad news. The most positive element of the latest inflation numbers is the easing in housing related price pressures. New dwelling costs and rents coming off reflecting the slump in demand for housing this year (both dwelling sales and the small lift in rental vacancy rates). If this continues it bodes well for some easing of core inflation pressures in 2027. The bad news is signs of a lift in the inflation pulse in 2026. Domestic market services is accelerating while the share of CPI basket items rising by 3% or more has risen to 2 year high of 70%. The economy is slowing, housing markets are soft and the unemployment rate is rising. But the RBA has no wiggle room. Inflation expectations are slipping above their target and cost pressures are showing few signs of easing. Their best bet of getting ahead of inflation would be to hike to 5% next week with a 40bp hike. They won’t despite their concerns voiced in a number of public forums over the past few months. Unfortunately, we are going to have to live with inflation for a bit longer. And further rate hikes in 2027 cannot be ruled out.