Source: Sharecast
The monetary policy board voted unanimously to keep rates on hold.
The RBA said in a statement: "The recent data on inflation suggest that some inflationary pressure may remain in the economy. With private demand recovering and labour market conditions still appearing a little tight, the board decided that it was appropriate to maintain the cash rate at its current level at this meeting.
"Financial conditions have eased since the beginning of the year, but it will take some time to see the full effects of earlier cash rate reductions. Given this, and the recent evidence of more persistent inflation, the board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve. The board remains alert to the heightened level of uncertainty about the outlook in both directions."
The Bank noted that inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and potential supply closer towards balance.
More recently, however, inflation has picked up, it said. Trimmed mean inflation was 1% in the September quarter and 3% over the year, up from 2.7% over the year in the June quarter.
Trimmed mean inflation strips out one-off and volatile price movements.
The RBA said this was "materially" higher than expected at the time of the August statement on monetary policy.
"Headline inflation rose sharply to 3.2% over the year in the September quarter, a large part of which was expected given the cessation of electricity rebates in a number of states," it said.
"The board’s judgement is that some of the increase in underlying inflation in the September quarter was due to temporary factors. The central forecast in the November statement on monetary policy, which is based on a technical assumption of one more rate cut in 2026, has underlying inflation rising above 3% in coming quarters before settling at 2.6% in 2027."
