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There were no major shocks from the Reserve Bank of Australia (RBA) on Melbourne Cup Day as it decided to hold the cash rate steady at 3.60 per cent for November.
The market widely expected the central bank to keep rates unchanged at the level set after the last 0.25 per cent cut in August.
The RBA’s rate hold comes less than a week after underlying inflation accelerated to 3.0 per cent in the September quarter, hitting the top of the central bank’s 2–3 per cent target band.
All four major banks had predicted the central bank would maintain its current settings, while the ASX 30 Day Interbank Cash Rate Futures was trading at 96.42, indicating a 7 per cent expectation of an interest rate decrease to 3.35 per cent.
The RBA Monetary Policy Board unanimously voted to hold the cash rate at its current level.
In its post-meeting statement, the RBA Monetary Policy Board noted that recent inflation has picked up.
“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,” it said.
The board noted that maintaining price stability and full employment remained its priority.
“The housing market is continuing to strengthen, a sign that recent interest rate reductions are having an effect. Housing prices are rising and dwelling construction costs have also started to increase again after a period of weak growth,” it said.
The RBA also revised its cash rate forecast, now expecting CPI inflation to be above 3 per cent for much of the next year before declining to around the middle of its 2-3 per cent target range by late 2027. Underlying inflation will keep climbing to hit 3.2 per cent for the December 2025 quarter, before easing in the second half of 2026.
‘Watchful pause’ on interest rates
Commenting on the cash rate decision, REA senior economist Eleanor Creagh said the RBA board had “signalled a watchful pause”.
“The bank remains cautious and data-driven, but mindful that policy is already restrictive and the labour market is gradually cooling,” Creagh said.
“Interest rates have moved lower this year, easing pressure on households and lifting confidence throughout spring. That has helped extend the national upswing to a tenth straight month, with home prices now 7.5 per cent higher than a year ago, the fastest annual pace since May 2024. Increased borrowing power, lower mortgage rates and improving sentiment are fuelling renewed competition.
“Keeping rates steady won’t derail that recovery.”
Domain’s chief of research and economics, Nicola Powell, said the RBA’s decision to hold reflected a more cautious stance.
“Consumers are spending again, which is great for the economy, but it also raises the risk of persistent inflation,” Powell said.
“Put simply, the RBA can’t move too quickly to cut rates, which will disappoint many hopeful buyers and mortgage holders.”
[Related: Rate hold is ‘safest bet’ on Melbourne Cup Day]
