The RBA maintained the official cash rate at 3.6% today amid a surprise increase in monthly headline inflation for August.
Today’s update from the RBA board outlined that a cautious approach is needed now as spending by consumers picked up.
‘With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the Board decided that it was appropriate to maintain the cash rate at its current level,’ said the Central Bank today.
This year, the RBA’s cuts have been intermittent – in February, May and August – with pauses in April, July and now September.
Back-to-back rate cuts are rare simply because it takes time for these cuts to work their way through the economy. And the monetary policy boffins at Martin Place are inherently cautious.
That said, after last month’s rate cut, today’s news will not be a huge surprise – particularly given the headline inflation rate for August jumped to 3.0% from 2.8% in July.
This spike shocked some experts.
However, it wasn’t all bad news. The annual trimmed mean – the RBA’s preferred measure of inflation – dipped to 2.6% for the year to August. This may have been the deciding factor in today’s pause.
What will be key is quarterly inflation figures – these are a better indicator for the RBA board than the monthly figures, which can bounce around.
The next quarterly figures are due out a week before the next RBA board meeting decision on Melbourne Cup day in November.
‘Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected,’ noted the RBA.
That said, some analysts still believe that we’ll still see another cut this year.
However, NAB wasn’t so sure – the bank has ruled out further rate cuts for the rest of the year, pushing back the timing of the RBA’s next cut after the “higher-than-expected” CPI data in August. NAB forecasts May 2026 as the next time we’ll see a cut by the RBA board.
Let’s see. Predicting rates is something even the top experts can get wrong.
‘Uncertainty in the global economy remains elevated,’ cautioned the RBA today. ‘There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided.’
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Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!