The Reserve Bank of Australia (RBA) kept interest rates unchanged on Tuesday, as expected, while warning that inflation pressures remain persistent despite earlier declines.
The RBA left its benchmark rate at 3.60% in a unanimous decision, following a 25 basis point cut last month. Policymakers noted that although inflation has eased significantly from 2022 peaks, the pace of decline has slowed. Core inflation is still running above the bank’s 2% to 3% target range.
The central bank also said inflation likely overshot forecasts in the September quarter. With private demand showing signs of recovery and labor market conditions staying firm, the RBA judged it appropriate to keep rates steady.
In its statement, the RBA repeated that its approach remains data-driven and that more time is needed to assess the full effects of previous cuts. So far in 2025, the bank has lowered rates by a total of 75 basis points, beginning a shallow easing cycle as growth slowed and labor market momentum cooled.
These measures have supported the Australian economy, helping it stay in expansion while stabilizing jobs. However, strong consumer spending and low borrowing costs have kept inflation elevated, limiting the RBA’s scope for further cuts.
The central bank stressed that stable prices and a strong labor market remain its top priorities, and it will act as needed to meet these goals.
Analyst reaction
Capital Economics analysts described the decision as expected but said the RBA’s tone appeared more hawkish. They noted the comments raise doubts about whether another 25 basis point cut will come in November, despite market expectations.
Even so, analysts believe further cuts are likely given the uneven recovery. They argued that leaving rates in restrictive territory risks weakening growth and pushing inflation below the midpoint of the 2% to 3% range in the medium term.
Capital Economics maintained its forecast that the RBA will lower rates to 3.1%, compared to the 3.3% level currently priced in by markets.
