RBA keeps rates on hold after alarming inflation jump
Hopes of a Melbourne Cup-day rate cut have been dashed as the Reserve Bank of Australia revealed its decision today.
Hopes of a Melbourne Cup-day rate cut have been dashed as the Reserve Bank of Australia elected to keep the cash rate on hold at 3.6 per cent on Tuesday.
The decision came as little surprise to economists after a surprise surge in inflation figures last week.
Underlying or trimmed mean inflation, which is the RBA’s preferred measure, jumped more than 1 per cent in the September quarter, which was materially higher than the bank’s forecasts.
Over the year to September, consumer prices climbed 3.2 per cent, a big increase from 2.1 per cent in the previous quarter, and above the top end of the central bank’s target.
Expectations for future moves will be influenced by the tone of the RBA board’s statement, governor Michele Bullock’s post-meeting conference and updated economic forecasts which are released concurrently.
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Economic growth, unemployment and especially inflation forecasts will be closely scrutinised as major revisions are likely to provide some more clarity on when, or if, borrowers might expect another cut.
After the initial spike in inflation, which was mainly driven by overseas factors, the recent uptick in inflation appears more domestically driven and harder to abate.
Ahead of the decision, Chartered Accountants chief economist Richard Holden said the RBA was “in a bind and the Australian economy is in a bind”.
“Unemployment is ticking up, but inflation is (also) ticking up, and if there was to be another increase in inflation … then they might have to start raising rates, which would really signal that they just misread the play terribly,” Holden said.
Tuesday’s meeting was the second last of 2025, with a final meeting of the year scheduled for December 9.
