It's that time of year again when the Melbourne Cup and the RBA's Cup Day meeting collide - and once again, inflation has thrown a spanner in the works.

On Wednesday, the Australian Bureau of Statistics (ABS) released the September quarter CPI numbers, and they weren't what mortgage holders or rate-cut hopefuls wanted to see. The Consumer Price Index rose 1.3 per cent for the quarter and 3.2 per cent annually, up sharply from 2.1 per cent in June. It marks the highest annual rate since June 2024, when inflation peaked at 3.8 per cent.

The key drivers were Housing (+2.5 per cent), Recreation and Culture (+1.9 per cent), and Transport (+1.2 per cent). Within Housing, electricity prices surged 9.0 per cent, fuelled by the unwinding of temporary rebates and ongoing energy-supply pressures. In other words, the cost-of-living squeeze is far from over.

The detail beneath the headline numbers tells a broader story. Goods inflation climbed from 1.1 per cent to 3.0 per cent, reversing much of the progress made earlier this year as supply chains normalised. Meanwhile, Services inflation - the stickier component watched closely by the RBA - also nudged higher to 3.5 per cent, from 3.3 per cent in June. Combined, the data painted a picture that's uncomfortably hot for a central bank looking for reasons to ease.

Many economists, like borrowers, were caught off guard. But not everyone was surprised. Hedge Clippings caught up with our regular contributors Nick Chaplin of Seed Funds Management and Renny Ellis of Arculus Funds Management, both of whom had been warning that the downtrend in inflation might stall before year-end. Both agree that Governor Michelle Bullock will have no choice but to keep rates on hold next Tuesday, and they go further - suggesting a December cut is off the table too.

As Ellis put it bluntly: "The RBA won't risk credibility by cutting while inflation is still moving the wrong way." Chaplin added that the composition of this quarter's CPI - especially the strength in services and energy - "potentially pushes any talk of easing into mid-2026 at best."

You can watch the video here.

That might sound pessimistic, but their reasoning is sound. The RBA has made it clear that returning inflation sustainably to the 2-3 per cent band is its top priority. A 3.2 per cent print that's trending upward rather than down doesn't leave much room to maneuver.

If anything, the latest figures raise the uncomfortable question of whether the next move could be up rather than down. A small but growing group of economists now think the RBA might have to nudge the cash rate higher in early 2026 if inflation fails to cool. While that remains a minority view, it's no longer unthinkable - especially given the RBA's concern about inflation expectations becoming embedded.

For households, that's hardly welcome news. Mortgage stress is already biting, and consumer sentiment remains fragile. The risk is that households tighten their belts further heading into Christmas, dragging retail sales and discretionary spending lower.

On the flip side, a resilient labour market continues to provide a buffer. Unemployment remains low, wage growth is steady, and migration-driven demand for housing and services keeps economic activity ticking over - even if it also adds fuel to inflation.

Financial markets, meanwhile, have dialled back their earlier optimism. Futures markets are now pricing no rate cuts until the second half of 2026, and the Australian dollar has firmed modestly on expectations that local rates will stay higher for longer.

All told, this week's CPI figures confirm that the inflation battle isn't over - it's merely entered a new phase. While prices aren't surging at 2022 levels, the "last mile" of disinflation is proving the hardest. For the RBA, patience will remain the key word. For borrowers, it means holding tight for a little longer - and hoping that the inflation genie finally goes back into the bottle before the RBA feels compelled to reach for the rate-hike wand again.

Chips to Champagne

On Wednesday, Jonathan Pain alerted us to NVIDIA CEO Jensen Huang's rousing presentation in Washington D.C., outlining how artificial intelligence is reshaping the world faster than most of us (including Hedge Clippings) can process it. You can watch it here - it's long but the first 5-10 minutes will give you a taste if you want to continue.

The market clearly liked what it heard. By the end of the day, NVIDIA's market capitalisation had surged past US $5 trillion -- the first company ever to reach that milestone.

To put that in perspective, NVIDIA added more in value in a single day than the entire market cap of Australia's largest company, the Commonwealth Bank of Australia. Not bad for a business that started out making graphics cards for gamers.

Huang's message was that the old computing model is being replaced by a new one built around accelerated computing and AI -- and investors are buying the story in record numbers. Whether that's sustainable or another chapter in the tech hype cycle is a question for next week, but for now, it's hard not to be impressed.