Data over recent weeks has prompted market analysts to reconsider and adjust new forecasts in regard to the Reserve Bank of Australia’s (RBA) monetary policy easing cycle.
Despite RBA governor Michele Bullock stating that the outlook on the domestic economy has strengthened in recent months, the RBA unanimously decided to hold the official cash rate at 3.6 per cent during its September monetary policy meeting.
The board, citing that the “decline in underlying inflation has slowed”, has shifted towards a more hawkish rhetoric following back-to-back surprises in consumer price index (CPI) figures for July and August.
Albeit the monthly readings (even by the RBA’s admission) being volatile, members stated this may indicate that inflation over the September quarter could be higher than expected at the time of the August meeting.
As such, the near-unanimously agreed Melbourne Cup Day meeting November rate cut now appears to be in doubt as economists have begun shifting their forecasts, with some suggesting that the RBA will once again remain on an extended pause as economic developments unfold.
Namely, major bank NAB recently cleared the 2025 calendar of any further rate cuts prior to the September meeting, stating that the next move will likely occur in May 2026.
Following the meeting and noting the board’s hawkish tone, the Commonwealth Bank of Australia (CBA) has shifted its 3Q25 trimmed mean inflation forecast to 0.8 per cent/qtr (up from 0.7 per cent), resulting in the annual rate of trimmed-mean inflation remaining at 2.7 per cent.
Considering the shift in forecast and RBA’s tone, CBA head of Australian economics Belinda Allen and senior economist Trent Saunders have confirmed the major bank now expects the next rate cut to come in February 2026.
“Given the cautious and gradual easing cycle so far, we expect the RBA will want to wait and see evidence that inflation continues to head towards the midpoint of the target band before easing further,” they said.
“By February, the 4Q CPI print will be available, as will further evidence of how the economy has responded to the three rate cuts to date.”
Similarly, Judo Bank’s economists, Warren Hogan and Matthew De Pasquale, anticipate rates to remain at 3.6 per cent “for the foreseeable future”, suggesting no moves until mid-to-late 2026 (barring unexpected deterioration in the labour market).
“Beyond this point, the direction of rates, as governor Bullock flagged, will depend on the rebound in consumer activity and remains uncertain.
“Momentum appears to be building in the private sector, and if this paves the way for businesses to improve margins as we expect, the next move is likely to be an increase, which we have pencilled in for November 2026,” Hogan and De Pasquale said.
Others, such as AMP chief economist Shane Oliver, are a little more optimistic about the prospect of a November rate cut.
Oliver noted central bank’s dovish guidance has been watered down, with the RBA now waiting on more data in November before deciding whether to hold or cut.
He argued that while near-term uncertainty has increased, subdued growth, softening jobs momentum and inflation broadly near target still point to further easing.
“…on balance we continue to expect the RBA to cut rates further but after last week’s higher-than-expected inflation data, we have wound back our expectation to two cuts from three,” Oliver said.
“We see September quarter trimmed mean inflation being close enough to RBA forecasts at 2.6–2.7 per cent/yoy to allow another rate cut in November but concede it’s a very close call.
“Beyond that we are forecasting one more rate cut in February, taking the cash rate to a bottom of 3.1 per cent. The risks are that they are delayed, or we get even less cuts.”
ANZ’s head of Australian economics, Adam Boyton, also stated that the major bank has maintained its November rate cut call ahead of key data prints (jobs, CPI and household spending).
“We also retain our view that once the cash rate reaches 3.35 per cent. it is likely to stay at that level for a considerable period,” Boyton said.
“Should the board not ease this year, there is a risk the recovery in private demand stalls a little and sees the board ease one final time in the first half of 2026 (instead of in late 2025).”
