The Reserve Bank of Australia’s Monetary Policy Board has decided to keep the cash rate steady at 3.60 percent following its latest meeting.
According to the Board, inflation has seen a recent uptick after declining significantly from its peak in 2022. The statement noted that “Trimmed mean inflation was 1.0 per cent in the September quarter and 3.0 per cent over the year, up from 2.7 per cent over the year in the June quarter. This was materially higher than expected at the time of the August Statement on Monetary Policy.” Headline inflation also increased to 3.2 percent over the year in the September quarter, which was partly attributed to the end of electricity rebates in several states.
The Board assessed that some factors behind higher underlying inflation during this period may be temporary. Its central forecast, based on an assumption of one more rate cut in 2026, anticipates underlying inflation will rise above three percent in coming quarters before returning to 2.6 percent by 2027.
Domestic economic activity is showing signs of recovery but remains uncertain. The statement highlighted ongoing growth in private demand and a strengthening housing market, supported by recent interest rate reductions. Housing prices and construction costs have begun rising again after previous weak growth periods, and credit continues to be accessible for households and businesses.
Labour market conditions remain somewhat tight despite a recent easing trend. Employment growth has slowed more than expected, with unemployment rising from 4.3 percent in August to 4.5 percent in September. Still, job vacancies remain high and many businesses report difficulties finding staff. While wage growth has eased from its peak, productivity gains have been limited and unit labour costs are still elevated.
The outlook for both domestic economic activity and inflation faces uncertainty due to developments at home and abroad. The Board indicated that if private demand exceeds expectations further, it could increase labor demand and capacity pressures or make it easier for businesses to pass on costs; however, this improvement may not persist.
Internationally, global economic uncertainty remains high but has had little impact so far on overall growth or trade flows; many forecasters have revised their short-term world growth projections upward even as trade policy changes and geopolitical risks continue to pose challenges.
The Board also acknowledged uncertainties about how restrictive monetary policy currently is, how quickly recent easing measures will take effect, and prospects for productivity growth—all presenting risks for both inflation and employment outcomes.
Emphasizing its priorities going forward, the Board stated: “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.” It added: “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 Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions,” according to today’s statement. “In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.”
Today’s decision was unanimous among members.
