The Reserve Bank of Australia has left the official cash rate unchanged at 3.6%, a decision widely anticipated by economists, as it warned that house prices and rents are set to rise following a surprise rebound in inflation. The central bank’s monetary policy board voted unanimously to hold rates, where they have remained since August.
RBA Governor Michele Bullock stated that the board did not consider a rate cut on Tuesday and cautioned that further easing could stall the decline in inflation. “If we ease much further, do we think inflation will continue to come down? … If you take our forecasts at face value, that’s a bit marginal,” she told reporters. “It’s possible that there’s no more rate cuts, it’s possible there’s some more … We are not wedded religiously to a particular path.”
Core inflation rose to 3% in September, the top of the RBA’s target range, marking the first acceleration of the underlying measure since 2022. Updated RBA forecasts now project headline inflation reaching 3.7% by mid-2026, with core inflation at 3.2%. Rents, house prices, and service fees are expected to rise faster than previously anticipated, and real wages are forecast to go backwards by the end of 2026.
The Commonwealth Bank had already dropped its prediction of another rate cut in 2026 ahead of the decision, and financial markets have fully priced in no further cuts. Cherelle Murphy, chief economist at EY, commented: “There may be no more rate cuts … [and] the tone of today’s communications suggests that this has become a more likely scenario.” Federal Treasurer Jim Chalmers acknowledged that while unemployment and inflation remain low, many Australians would have preferred relief through a rate cut.
