You may have seen stories today whipping up concerns about the International Monetary Fund’s (IMF) latest forecasts for inflation in Australia.

What’s going on? 

The IMF has simply updated its inflation forecasts, and now they match the Reserve Bank’s revised forecasts from two months ago. Stop the presses everyone.

Let’s tell the “story” with three graphs.

What is inflation forecast to do?

In August, the RBA updated its official economic forecasts in its latest quarterly Statement on Monetary Policy.

It said headline inflation in Australia is now forecast to decline to 3 per cent by the end of this year, and to 2.8 per cent by June next year.

Then, headline inflation is forecast to jump to 3.7 per cent by the end of next year, before falling back down to 2.6 per cent by the end of 2026.

See the purple line in the graph below.

Economists say that forecast spike in headline inflation next year will partly be a consequence of state and federal government energy rebates being withdrawn from the economy, which will see energy prices jump.

And the RBA isn’t overly concerned about that forecast spike in headline inflation.

It’s much more concerned about “trimmed mean” inflation.

Why? Because trimmed mean inflation is a measurement of underlying (or “core”) inflation.

When the RBA talks about the need to drag inflation back down into its 2-3 per cent target range, it’s talking about underlying (trimmed mean) inflation.

And according to its August forecasts, trimmed mean inflation is expected to decline from 3.5 per cent at the end of this year, to 3.1 per cent in June next year.

Then, it’s forecast to keep declining to 2.9 per cent by the end of next year, and to 2.7 by June 2026.

See the blue dashed line in the graph above.

In summary: the RBA is forecasting headline inflation to jump higher next year, and then to decline again, while it’s forecasting trimmed mean inflation to simply keep declining over the next couple of years.

That’s the actual story. And we already knew about it. We covered that news two months ago.

Shiver me timbers, the forecasts match!

So where does the IMF come in?

The IMF released its latest world economic outlook overnight with its new forecasts. Its revised forecasts account for developments in the global economy since April.

And its new forecasts for Australia’s headline inflation now match up with the RBA’s revised forecasts from two months ago.

See the graph below.

The IMF’s new forecasts for headline inflation (the green squares) are simply tracking the RBA’s latest forecasts for headline inflation.

And note, we’re not talking about underlying inflation. The IMF only produced forecasts for headline inflation.

Still interested in the story?

Here’s one more graph.

It show how the IMF’s forecasts for headline inflation changed between its April and October economic outlooks.

In April, it was forecasting Australia’s annual rate of headline inflation to be 2.83 per cent by the end of 2025, but it has revised that figure up to 3.6 per cent.

That’s roughly what the RBA is forecasting too.

In fact, the RBA is forecasting headline inflation to be running at 3.7 per cent by the end of 2025, so the IMF is actually forecasting headline inflation to be slightly lower than the RBA at that point. 

Why isn’t that the story?

The Bureau of Statistics will release Australia’s September quarter inflation data on Wednesday next week.

That data will feed into the RBA Board’s deliberations on interest rates.