The Reserve Bank of Australia (RBA) has left the official interest rate unchanged at 3.6%, warning that house prices and rents are set to rise in 2026 following a surprise rebound in inflation. The decision, widely anticipated by economists and major banks, marks the first time since August that the cash rate has remained steady after three cuts in 2025.
RBA Governor Michele Bullock stated that the board did not consider lowering rates on Tuesday, and cautioned that further cuts could hinder progress on inflation. “If we ease [rates] much further, do we think inflation will continue to come down? … It’s possible that there’s no more rate cuts, it’s possible there’s some more,” Bullock told reporters, adding that the bank is not wedded 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 predict headline inflation will reach 3.7% by mid-2026, with core inflation at 3.2%. Rents, house prices, and service fees are expected to rise faster than previously forecast, while the bank’s earlier expectation of inflation falling to 2.5% by 2027 is no longer achievable.
Economists and banks had overwhelmingly predicted no change, with Commonwealth Bank and financial markets dropping expectations of further cuts in 2026. Cherelle Murphy, chief economist at EY, noted that “there may be no more rate cuts … [and] the tone of today’s communications suggests that this has become a more likely scenario.”
The RBA’s statement on monetary policy highlighted that higher inflation would cause real wages to go backwards by the end of 2026. Bullock dismissed a surprise jump in unemployment in September, describing the jobs market as still running hot. Federal Treasurer Jim Chalmers acknowledged that Australians remain under pressure and many would have preferred a rate cut, but unemployment and inflation remain low.
