The Reserve Bank of Australia has left the cash rate on hold at 3.60 per cent, keeping policy steady as it weighs signs of firmer household spending against a risk that price pressures could prove more persistent than expected.
“At its meeting today, the Board of the Reserve Bank of Australia decided to leave the cash rate unchanged at 3.60 per cent,” the central bank said, noting progress on inflation had slowed after a sharp fall from its 2022 peak.
The RBA said both headline and trimmed mean inflation were within the 2–3 per cent range in the June quarter, but cautioned that “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.”
Officials reported a quicker-than-anticipated recovery in private demand in the June quarter, with household consumption picking up as real incomes improve and financial conditions ease. The housing market is strengthening and credit remains readily available to households and businesses.
Labour market conditions were described as broadly steady and still a little tight. Employment growth has slowed slightly more than expected, but the unemployment rate held at 4.2 per cent in August. While wage growth has eased from its peak, the Bank flagged weak productivity and elevated growth in unit labour costs.
The Board of the Reserve Bank of Australia highlighted substantial uncertainties at home and abroad. Domestically, stronger readings on growth and inflation could reflect households becoming more comfortable to spend as incomes and wealth rise, potentially making it easier for firms to pass on higher costs and lift labour demand. Equally, the recent pickup in consumption may fade if global developments weigh on confidence.
Global risks remain elevated. The Bank said there is greater clarity on the scope of US tariffs and other countries’ policy responses, reducing the chance of extreme outcomes, but trade policy is still expected to drag on global growth over time. Broader geopolitical risks could also weigh on demand and, in turn, domestic labour market conditions. The RBA also pointed to uncertainty around the lags from recent policy easing, the balance of demand and supply, labour market conditions and the outlook for productivity.
“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 of the Reserve Bank of Australia decided that it was appropriate to maintain the cash rate at its current level at this meeting,” it said. Officials added that financial conditions have eased since the start of the year and the effects of earlier cash rate reductions will take time to flow through. “The Board of the Reserve Bank of Australia 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.”
Looking ahead, “The Board of the Reserve Bank of Australia will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions,” with a close watch on global conditions, domestic demand, inflation and the labour market as it pursues its mandate of price stability and full employment.
The decision was unanimous.
