Reserve Bank Holds Cash Rate Amid Uncertain Outlook

Early inflation indicators for September have informed the Reserve Bank of Australia’s “cautious” approach to its policy decision for the month as it weighs up an uncertain outlook. 

The central bank has decided unanimously to keep the cash rate on hold at 3.6 per cent at its Monetary Policy Board meeting this week. 

“The board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve,” the decision notice stated. 

“The board remains alert to the heightened level of uncertainty about the outlook. It noted that monetary policy is well placed to respond decisively to international developments if they were to have material implications for activity and inflation in Australia.

“The board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions.”

The board outlined key areas of concern that they would monitor in the coming months, including developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. 

Looking ahead, Oliver Hume chief economist Matt Bell said the strong outlook for land markets could be tempered if today’s rates decision spilled over into the remainder of 2025. 

Bell said although the decision to keep the cash rate at 3.6 per cent was not unexpected, the outlook for the last few months of the year had shifted. 

“Just a few weeks ago, another cut in November or December was a near certainty,” Bell said.   

“Multiple forecasters now think that the RBA is done for 2025 and will not cut again until closer to the middle of 2026.”

While the property industry has benefited from the past three rate cuts, and seven consecutive monthly increases in house prices, that market confidence may be tested in the ensuing months. 

“While existing mortgage holders and potential new entrants to the market would not have been banking on any savings from today’s decision, they surely are still counting on more cuts to help affordability over the next six months,” Bell said.   

“It will be a nerve-racking month until the September quarter inflation prints on October 29 to provide some more concrete guidance.”

REA Group senior economist Eleanor Creagh said the inflation data would provide a clearer understanding of the trajectory ahead of the next RBA meeting. 
 
“Keeping interest rates on hold allows the bank to assess incoming data and balance risks,” Creagh said.  

“Inflation is contained, the economy is operating near full employment, but job growth has slowed, and vacancies continue to decline.
 
“While affordability pressures remain, this year’s series of interest rate cuts, improved sentiment, and the October expansion of the Home Guarantee Scheme, are expected to keep upward pressure on home prices in the months ahead.”