The Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 3.6%, warning that house prices and rents are set to rise further due to a surprise rebound in inflation. The decision, widely expected by economists and major banks, marks the third consecutive hold since August.
RBA Governor Michele Bullock stated that the board did not consider lowering rates at this meeting, cautioning that further cuts could hinder progress on inflation. “If we ease much further, do we think inflation will continue to come down? … That’s a bit marginal,” she told reporters. Bullock added that while more cuts are possible, the board is not committed to any particular path.
Major banks, including Commonwealth Bank, have abandoned predictions of a rate cut in 2026, with financial markets now pricing no cuts until 2027. Core inflation rose to 3% in September, the first acceleration since 2022, and the RBA’s updated forecasts show headline inflation reaching 3.7% by mid-2026. The bank no longer expects inflation to fall to its 2.5% target by 2027.
Rising rents, house prices, and service fees are among the key drivers of higher inflation. The RBA noted that past rate cuts and increased consumer spending have pushed the economy close to its speed limit, straining businesses and adding to price pressures. Real wages are expected to decline by the end of 2026 as inflation outpaces wage growth.
Federal Treasurer Jim Chalmers acknowledged that Australians remain under pressure and would have welcomed a rate cut, but stressed that unemployment and inflation are still relatively low. The RBA’s next meeting is scheduled for February 2026.
