RBA kept the cash rate unchanged at 3.60% today, as markets had fully priced. But the tone from Governor Michele Bullock was firmer than expected, pushing back against speculation of early-2026 easing. “Given what’s happening with underlying momentum in the economy … it does look like additional cuts are not needed,” she said, adding that she does not see rate cuts “on the horizon for the foreseeable future.”
While Bullock confirmed the board did not discuss a rate hike as an active policy option today, she stressed members spent “quite a lot” of time examining what conditions might force them to lift rates next year. The discussion centered on the persistence of inflation and how much further the economy needs to cool before the board can be confident price pressures are returning to target.
Asked whether a February rate increase is plausible, Bullock did not rule it out. She said the RBA will monitor whether inflation remains sticky: if inflation fails to move back toward target, “then I think that does raise questions about how tight financial conditions are and the board might have to consider whether or not it’s appropriate to keep interest rates where they are or in fact at some point raise them.” Any decision, she added, will be made “meeting by meeting.”
The accompanying statement echoed this mildly hawkish stance, noting that recent data show inflation risks have “tilted to the upside.” Although the board judges part of the recent lift in underlying inflation as driven by temporary factors, policymakers admit uncertainty about the new monthly CPI series and acknowledge signs of a “more broadly based pick-up” in price pressures that may prove persistent.
Labor market indicators continue to suggest conditions remain “a little tight.” While the Wage Price Index has eased from its peak, broader wage measures are still running strong, and unit labor costs remain high.
For now, the RBA is signaling a steady policy stance, but the barrier to easing has grown significantly while the door to a potential hike in 2026 is now visibly open.
