The Reserve Bank of Australia (RBA) has decided to hold the cash rate at 3.6 per cent as widely speculated and expected by markets and economists alike following hotter-than-anticipated quarterly inflation figures.
The RBA confirmed that today's decision was unanimous.
The board's post-meeting statement revealed that members determined the recent data on inflation "suggest that some inflationary pressure may remain in the economy".
"With private demand recovering and labour market conditions still appearing a little tight, the board decided that it was appropriate to maintain the cash rate at its current level at this meeting," the statement read.
"Financial conditions have eased since the beginning of the year, but it will take some time to see the full effects of earlier cash rate reductions."
The RBA added that members "judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve".
"The board remains alert to the heightened level of uncertainty about the outlook in both directions... [and] will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions."
The statement concluded that the RBA remains focused on its mandate and will "do what it considers necessary to achieve that outcome".
Prior to the decision, the Australian Bureau of Statistics (ABS) released the ever-important September quarter CPI data, which revealed that trimmed-mean inflation lifted by 1 per cent over the quarter.
This returned starkly above the general 0.8 per cent market consensus and the RBA’s 0.6 per cent forecast.
Australia’s inflation appears to have re-accelerated, with core inflation rising to 3.0 per cent (the first annual increase since 2022) and headline inflation lifting 1.3 per cent for the quarter and 3.2 per cent over the year.
Economists said the surprise result has wiped out market hopes of a 2025 rate cut, pushing expectations for easing into mid-2026 and raising the risk of another hike if price pressures worsen.
Judo Bank economists noted the chance of a rate cut today collapsed to near zero, while the Commonwealth Bank and ANZ now expect the Reserve Bank to hold rates for longer, adopt a more hawkish tone and revise inflation forecasts higher.
CBA and ANZ said consumption and housing activity have been stronger than expected, and the labour market remains “a little tight,” limiting scope for easing.
VanEck and Betashares warned that surging energy costs and sticky services inflation are key drivers of the price rebound, with energy bills climbing sharply despite rebates.
Betashares added that policy failures have worsened energy market volatility.
With inflation persistence and firm spending momentum, most economists now see little chance of cuts in 2025 – and a slim risk the RBA may need to tighten further, even as the US Federal Reserve continues cutting rates.
Indeed, VanEck's head of investments and capital markets, Russel Chesler, commented that "some have gone so far as to say that the RBA need to ‘give one of the rate cuts back’, by which they mean implement a rate increase, and there is an outside chance that this may need to happen".
"Should wage growth remain elevated, or worse, accelerate, we could see more upward pressure on services inflation, which has increased recently across restaurants and housing," he said. "Government energy rebates may not be renewed for another cycle, which means households could be in for power bill shock next year."
