Surprising no one, the Reserve Bank of Australia (RBA) has chosen to keep interest rates on hold for the November cycle, waiting for the dust to settle further as headline inflation dips to 2.8%, falling within the central bank’s 2-3% target for the first time.
As Susanna Nelson pointed out in her article earlier today, the RBA is likely waiting to gauge the effect of government subsidies on electricity prices, which have been lowered as much as 24% according to the ABS.
Those subsidies are set to fall off soon, which will likely apply more pressure to both consumers and small businesses who will need to absorb the additional costs.
Trimmed mean inflation also remained above the RBA’s goal, and services inflation has continued to be stubbornly sticky, notching 4.6% over the past year.
Interest rates to remain until inflation falls
A survey of economic experts by Finder.com found all 38 were anticipating the RBA’s move, expecting the cash rate to remain at 4.35%.
“This outcome was the one most favoured by economists and priced by the markets,” CreditWatch chief economist Ivan Colhoun said in response to the RBA’s decision.
“The outcome likely reflected the at forecast 0.8% quarter on quarter trimmed mean outcome for Q3, which just allows the RBA Board to claim continuing progress toward the 2.5% inflation target the Board is trying to achieve by the second half of 2026.
“It will be interesting to see in the Governor’s press release whether there was serious discussion of a further interest rate rise at this meeting, as some Board members may be growing more worried about the risk of continuing to underachieve on the inflation target, as the Board continues to arguably overachieve on its unemployment mandate.
“On hold rates will likely not be welcomed by those struggling under high interest rates and high cost of living, however, the Board has been clear that Australian interest rates will remain high until it has greater confidence that inflation will return to target.”
Graham Cooke, head of consumer research at Finder, said pressure was mounting for a rate cut in February next year.
“Even though inflation has hit the RBA’s target window of 2-3%, this doesn’t trigger the RBA to automatically start cutting rates – which will disappoint homeowners,” he said.
“With a record high 47% of borrowers struggling to make their repayments in October, thousands will be forced to cut back on spending in other areas.
“Many are depending on the multiple rate cuts predicted to come in 2025,” Cooke concluded.