The Reserve Bank of Australia (RBA) maintained the 3.60% cash rate, as of this writing, after inflation rose more sharply than anticipated in the September quarter.
Trimmed mean inflation climbed to 3.0% year-on-year, while headline inflation hit 3.2%, driven by the end of electricity rebates and higher service costs.
Despite a slight uptick in unemployment to 4.5%, the housing market and private demand continue to strengthen, prompting the RBA to adopt a cautious stance on future rate cuts.
Inflation Takes a Step Up
Inflation, which had been declining since its 2022 peak, has made an unexpected rise. Underlying inflation (trimmed mean) was 1.0 per cent for the September quarter and 3.0 per cent annualised, up from 2.7 per cent in the prior quarter, at the time of writing. Headline inflation jumped to 3.2 per cent over the year in that quarter, largely driven by the end of electricity rebates and rising services costs.
Economy Showing Strength — with Risks
Domestic demand is recovering: consumer spending remains upbeat, housing prices and dwelling-construction costs are rising again, and credit remains accessible. At the time of writing, unemployment has lifted to 4.5 per cent from 4.3 per cent, yet labour markets are still tight with high job vacancies and weak productivity gains.
Looking Ahead: Cautious Stance
While some of the underlying inflation increase is viewed as temporary, the RBA projects inflation to rise further above 3 per cent in coming quarters before easing toward 2.6 per cent in 2027, at the time of writing.Given this backdrop, the Board judged that monetary policy remains somewhat restrictive and chose not to lower rates now, emphasising it will monitor labour market conditions, global risks and demand-supply balance.
Summary
With inflation creeping up and domestic demand recovering, the RBA has held the cash rate at 3.60% to guard against inflation persistence. Although the labour market shows signs of easing, it remains tight enough to warrant caution. Markets now expect any future rate cut to be delayed into 2026 or later.
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Australias Monetary Policy Board Keeps Cash Rate at 3.60% Amid Inflation Rise
Highlights:
Inflation Takes a Step Up
Inflation, which had been declining since its 2022 peak, has made an unexpected rise. Underlying inflation (trimmed mean) was 1.0 per cent for the September quarter and 3.0 per cent annualised, up from 2.7 per cent in the prior quarter, at the time of writing. Headline inflation jumped to 3.2 per cent over the year in that quarter, largely driven by the end of electricity rebates and rising services costs.
Economy Showing Strength — with Risks
Domestic demand is recovering: consumer spending remains upbeat, housing prices and dwelling-construction costs are rising again, and credit remains accessible. At the time of writing, unemployment has lifted to 4.5 per cent from 4.3 per cent, yet labour markets are still tight with high job vacancies and weak productivity gains.
Looking Ahead: Cautious Stance
While some of the underlying inflation increase is viewed as temporary, the RBA projects inflation to rise further above 3 per cent in coming quarters before easing toward 2.6 per cent in 2027, at the time of writing. Given this backdrop, the Board judged that monetary policy remains somewhat restrictive and chose not to lower rates now, emphasising it will monitor labour market conditions, global risks and demand-supply balance.
Summary
With inflation creeping up and domestic demand recovering, the RBA has held the cash rate at 3.60% to guard against inflation persistence. Although the labour market shows signs of easing, it remains tight enough to warrant caution. Markets now expect any future rate cut to be delayed into 2026 or later.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au