The Reserve Bank of Australia’s Monetary Policy Board has decided to keep the cash rate unchanged at 3.60 percent following its latest meeting.
The Board noted that while inflation had dropped significantly since its peak in 2022, recent data shows a renewed increase. “Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and potential supply closer towards balance. More recently, however, inflation has picked up. 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 rose sharply to 3.2 per cent over the year in the September quarter, a large part of which was expected given the cessation of electricity rebates in a number of states,” according to the statement.
The Board assessed that some of this rise in underlying inflation may be temporary but forecasts suggest underlying inflation could exceed 3 percent in coming quarters before easing to around 2.6 percent by 2027. “The Board’s judgement is that some of the increase in underlying inflation in the September quarter was due to temporary factors. The central forecast in the November Statement on Monetary Policy, which is based on a technical assumption of one more rate cut in 2026, has underlying inflation rising above 3 per cent in coming quarters before settling at 2.6 per cent in 2027.”
On domestic economic activity, indicators point to ongoing recovery with strengthening private demand and a robust housing market reflecting recent interest rate reductions. However, uncertainty remains about future growth and inflation trends.
Labour market conditions are described as slightly tight despite some recent easing: “Various indicators suggest that labour market conditions remain a little tight, notwithstanding a recent easing. Growth in employment has slowed by slightly more than expected and the unemployment rate rose to 4.5 per cent in September from 4.3 per cent in August.” The statement also notes that job vacancies remain high and many firms report difficulties finding workers.
Internationally, global economic uncertainty persists though its impact on Australia’s growth and trade has so far been limited.
In making its decision, the Board emphasized caution amid ongoing uncertainties regarding monetary policy effects and broader economic trends: “Maintaining price stability and full employment is the priority… 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.”
Looking ahead, decisions will continue to be guided by evolving data related to global markets, domestic demand, inflation, and employment: “The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions… The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.”
Today’s decision was made unanimously by all members present.
