Reserve Bank keeps rates on hold at 3.6%
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The news: Reserve Bank governor Michele Bullock declined to provide "forward guidance" during her post-decision press conference. And she declined to repeat her August commentary that it is "about the timing, not the direction" of rates that's unclear.
Regardless, the RBA’s positioning on rates has been interpreted as hawkish by economists who are warning the chances of a cut in November are decreasing.
ANZ economists said in a note that, unless there’s a shock, “we are quite close to the end of the easing cycle” and the post-meeting statement “heightens the risk … that the November meeting passes without a rate cut”.
They have not shifted their expectation that rates will get to 3.35% and remain there for a long period, but warn the risk is the board doesn’t cut, the private demand recovery stalls, and there is a final cut in the first half of 2026.
Goldman Sachs analysts also found the statement “a little more hawkish” than expected with more emphasis on factors such as the lag effect of monetary policy and the monthly inflation report.
EY chief economist Cherelle Murphy said in a statement that the “more hawkish tone indicates that the case for further rate cuts is a little softer”. Murphy is maintaining her forecast for one more rate cut during this easing cycle.
However, Betashares chief economist David Bassanese said it was “unclear whether the hawkish tone of today’s statement was simply a justification for why the Bank didn’t cut today or it’s a signal that it’s less inclined to cut interest rates in coming months”.
AMP chief economist Shane Oliver is warning the RBA retains an easing bias but it has “been substantially watered down”.
Oliver continues to expect rate cuts but has now eased back to two cuts from three, noting a cut in November is still a “very close call”.
“The risks are that they are delayed, or we get even less cuts,” he said in a note.
However, Westpac chief economist Luci Ellis, a former assistant governor at the RBA, said the data was a “remarkably non-committal set of communications, making no mention of the previous forecasts being predicated on further cuts to the cash rate”.
She said the board is “clearly trying to give itself maximum optionality for the next few meetings”.
“This means that our current base case of a cash rate cut in November is far from assured, though neither is it off the table,” she said.
“The longer the [board] delays further cuts, the more likely it is that it will end up cutting by more than it current envisages.”
RBA tips inflation to be higher than forecast as economists flag chance of no more cuts in 2025
More news: The Reserve Bank board is expecting inflation in the most recent quarter to be higher than it had expected when it published its latest forecasts in August.
In the RBA's statement revealing it was keeping rates on hold at the September meeting, a few weeks before the quarterly inflation data is due out at the end of October, it noted the next statistical release is likely to be hotter than previously anticipated.
"Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the August Statement on Monetary Policy," it said.
Vanguard senior economist Grant Feng said in a note his baseline view remains one more cut for 2025, bringing the cash rate to 3.35%.
Even so, he said the “upside surprise” from the August CPI indicator and the firming in economic recovery “raises the risk of a rate pause in the last quarter of 2025”.
“We continue to expect the disinflation process in Australia to be slow and uneven. Accordingly, the RBA is likely to maintain a cautious stance, with any future easing expected to proceed at a measured pace over the remainder of the year,” he said.
What they said: A statement from Treasurer Jim Chalmers focused on the progress made so far on getting inflation down and the global environment.
“The RBA’s statement makes it clear that economic uncertainty is ‘elevated’ around the world which could weigh on global growth,” he said.
Reserve Bank keeps rates on hold at 3.6%
The news: The Reserve Bank has kept rates on hold at its September monetary policy board meeting.
The decision was widely expected by economists, following stronger-than-expected data over the past month.
The board said it was "appropriate to remain cautious" and reiterated plans to keep a close eye on the evolving data, while also remaining "alert" to heightened uncertainty in the economic outlook.
The numbers: The RBA has kept rates at 3.6%, following a 25 basis point cut in August. It has cut rates three times during this easing cycle, with the first cut in February. Each cut has been followed by a pause.
The context: While the outcome of today's meeting was in-line with expectations, economists have mixed views on the future trajectory of interest rates. Some expect a further three cuts, others think just one more is likely during this cycle.
The RBA said the board was unanimous in its decision.
There is also disagreement over the timing of the next cut, with some anticipating November will usher in a cut following the quarterly inflation data and others expecting the central bank to stay on hold until next year.
What they said: “The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market,” the RBA monetary policy board said in a statement.
“On the domestic side, stronger-than-expected data on growth and inflation may indicate that households have become more comfortable consuming as real incomes and wealth rise,” it said.
“If this continues, it may make it easier for businesses to pass on cost increases and lead to more demand for labour.
“Alternatively, the recent growth in consumption might not persist, particularly if households become more concerned about overseas developments.”
The source: Reserve Bank monetary policy board statement
