RBA holds rates steady as inflation picks up pace
Today, the RBA bucked 2025’s trend of rate cuts at every second board meeting by holding the official cash rate at 3.60%.
Today’s news, issued just before the running of the Melbourne Cup, was largely expected after recent economic data suggested inflation was making a late charge.
The concern, alluded to by the RBA today, is the September quarter figures, released last week.
The annual rate of inflation is now at 3.2% – above market expectations after it rose 1.3% in the September quarter. The RBA’s preferred band for inflation is 2–3%, so it’s back above this target range, too.
Crucially, too, the key trimmed mean measure of core inflation – the RBA’s preferred metric – jumped by 1.0% in the quarter. This was well above forecasts, rising from 2.7% to 3.0%.
So, the RBA really had no choice but to maintain its current rate as it monitors inflation.
‘The Board’s judgement is that some of the increase in underlying inflation in the September quarter was due to temporary factors,’ the RBA said today.
‘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.’
The RBA views the quarterly spike as a blip (caused largely by surging electricity and travel prices) and not a trend that requires further monetary policy tightening.
And most analysts are on board with that view – expectations are that the Central Bank will hold off on a Christmas rate cut on 9 December.
However, 2026 could be different.
Commonwealth Bank of Australia economist Belinda Allen has warned that the RBA might be forced to increase rates in mid-2026.
On the other hand, Oxford Economics Australia believes we’re still on track for a couple of rate cuts in 2026, bringing the official cash rate to a ‘neutral’ level of 3.10%.
This current shift follows three 0.25% cuts by the RBA in 2025 as inflation slowly eased back into the target range.
‘The recent data on inflation suggest that some inflationary pressure may remain in the economy,’ cautioned the Central Bank.
But the RBA added a slightly optimistic note in relation to global factors, adding that ‘uncertainty in the global economy remains elevated but so far there has been minimal impact on overall growth and trade.’
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