The Reserve Bank of Australia has announced a hold in the official cash rate, leaving it at 3.6 per cent, in a move largely expected by market analysts. The RBA confirmed that the decision to hold was unanimous.
The following Statement by the Monetary Policy Board revealed that recent data, while “partial and volatile” suggested that inflation over 3Q may be higher than expected at the time of the previous meeting.
“With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the board decided that it was appropriate to maintain the cash rate at its current level at this meeting,” the RBA stated.
“Financial conditions have eased since the beginning of the year and this seems to be having some impact, but it will take some time to see the full effects of earlier cash rate reductions. The board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve.”
Prior to the decision, economists at major bank NAB pushed back their forecast for Reserve Bank of Australia rate cuts, now expecting no move until May 2026.
The revision came after August inflation data proved stronger than expected, suggesting persistent price pressures.
NAB said the RBA is likely to wait for at least two or three more quarterly inflation prints before easing, and now sees the cash rate eventually settling at 3.35 per cent.
Other major banks remained cautious. ANZ expected no change at the September meeting but anticipated a more hawkish tone, with upcoming labour, spending and inflation data proving decisive.
The Commonwealth Bank trimmed the likelihood of a 2025 cut, warning that any move is heavily data dependent, while Westpac still projects cuts beginning in November, though acknowledges the timing is less certain.
Judo Bank economists Warren Hogan and Matthew De Pasquale said the central bank is likely to stay on hold “for the foreseeable future” after dropping their forecast for a final 2025 cut.
They warned the next adjustment may not come until mid-to-late 2026, and depending on economic conditions, could even be an increase.
However, they flagged risks from a softer consumer recovery, weaker labour demand and rising unemployment that could push the RBA towards easing instead.
Ivan Colhoun, chief economist at CreditorWatch, said markets had rightly anticipated a hold given “signs of stronger consumer spending and higher monthly inflation in the latest data”.
He noted that if these conditions persist, the chances of another cut this year appear slim.
VanEck senior portfolio manager Cameron McCormack argued rates may stay higher for longer, with sticky services inflation, low unemployment and rising wages keeping pressure on the central bank.
“We could be at the end of the cutting cycle,” he said, adding that while markets still see February 2026 as the next likely cut, an unforeseen shock may be the only catalyst for an earlier move.
McCormack said Australia’s economy continues to show resilience, with population growth lifting household spending and gross domestic product even as per capita growth remains subdued.
