Summary 

• Interest rate swaps currently imply an RBA rate cut in November is more likely than not. 

• The Q3 CPI result could significantly alter market pricing and expectations. 

• Traders will be watching how the AUD and ASX200 react to the inflation data.  

A Make-or-Break Inflation Print 

At its September meeting, the RBA kept the cash rate at 3.6%, describing policy as “still a little restrictive,” while reaffirming its focus on delivering price stability and full employment. Since then, the RBA has assessed the September employment data, which revealed a 20bp rise in unemployment to 4.5%, the highest since November 2021 — along with a loss of 40,900 full-time jobs. Although the increase partly reflected a rise in participation and labour supply, the RBA would still see 4.5% as close to full employment. 

On balance, the jobs data could support one more 25bp rate cut to bring the cash rate to a neutral setting. However, with the economy showing signs of a soft landing and GDP growing around potential, the final decision will hinge on inflation. 

Given the slightly hawkish tone in the RBA’s minutes, the bias seems tilted towards a mindset of “show us why we should cut” rather than “show us why we should hold.” 

Current setup in AUD rates: 

• Aussie interest rate swaps price in 16bp of cuts for the 4 November meeting (≈62% chance of easing). 

• If the RBA holds in November, markets imply an 86% probability of a December cut. 

• By mid-2026, swaps price roughly 50bp of total cuts, with a projected terminal rate around 3.15%. 

The Q3 CPI print could meaningfully alter this pricing — and with it, the direction of the AUD and ASX200.

• Headline CPI: +1.1% q/q, +3.0% y/y 

• Trimmed Mean CPI: +0.8% q/q, +2.7% y/y 

• Range for Trimmed Mean CPI: +0.7% to +1.0%

Market Implication Expected Reaction - Using Trimmed Mean CPI (q/q) to Guide:

• ≤ 0.7% - Swaps imply a 75–85% probability of a November rate cut. AUD trades lower, ASX200 rallies 
• 0.8% - The outcome that should largely be priced in; muted market reaction Lineball for November cut — volatility in AUD possible 
• 0.9% The implied odds of a cut fall to 45–55%. AUD strengthens, ASX200 modestly weaker 
• ≥ 1.0% Inflation would be above the RBA's target band; Swaps imply a <20% probability of a 25bp cut - AUD rallies 60–70 pips, ASX200 down ~0.6%+ 

Markets to Watch 

• FX: The AUDNZD is typically the most sensitive to shifts in Aussie rate expectations, though volatility could extend across other AUD crosses. The AUDUSD will also be in focus, though moves may be shorter-lived given its broader sensitivity to global risk sentiment. 

• Equities: Within the ASX200, rate-sensitive sectors such as insurers, banks, REITs, and consumer stocks will likely draw trader attention.

Bottom Line 

The RBA has made it clear that it places significant weight on the quarterly CPI print. With markets pricing a mild skew toward a November rate cut, the Q3 CPI data could decisively guide expectations for whether the RBA cuts or holds — and in doing so, set the tone for AUD, rates, and equity market performance into year-end.