RBA Holds Cash Rate Steady as Bullock Urges Caution on Inflation Outlook
The Reserve Bank of Australia (RBA) has left the official cash rate unchanged at 3.6%, in a unanimous board decision that was widely expected by economists and markets. The decision comes amid volatile inflation data, a softening labour market, and heightened uncertainty around the economic outlook.
Key Takeaways
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Cash rate held at 3.6% — no surprises for markets.
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Inflation data came in higher than expected, raising the prospect of persistent price pressures.
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Bullock emphasised the need to treat monthly CPI data with caution, but acknowledged it still carries useful signals.
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The RBA remains data-dependent, avoiding firm forward guidance on rate moves.
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Markets still price a ~50% chance of a November cut, but expectations have softened following the inflation surprise.
Why the RBA Hit Pause
In its post-meeting statement, the board said:
“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.”
The RBA has already cut rates three times in 2025 as inflation fell back within the 2–3% target band and the labour market began to ease. But the August CPI data ticked up unexpectedly, pointing to potential upside risks in the September quarter inflation print.
At the same time, the labour market showed signs of softening, with employment unexpectedly falling in August. Internationally, the US Federal Reserve delivered its first rate cut after a 10-month pause, adding another layer of complexity to global monetary conditions.
Bullock’s Message: ‘Don’t Take CPI at Face Value’
Governor Michele Bullock took a measured tone in her press conference, underscoring that while monthly CPI figures are volatile, they’re not meaningless:
“You just can’t look at monthly CPI literally and take it at face value… You’ve got to take some of it with a grain of salt, and you’ve got to look at some of it in the context of what you think it might mean for your forecast.”
She added that the outlook for interest rates will depend heavily on the evolving economic data, and stressed that the RBA will continue to take decisions on a meeting-by-meeting basis.
No Forward Guidance, But Inflation Surprise Shifts Tone
Bullock made clear she would not provide forward guidance on the timing of future cuts:
“I’m not going to predict what the interest rate will be in the next 3-6 months… What I’m saying is that we have got a situation which is actually quite positive. We have inflation back in a 2-3 per cent band.”
She acknowledged that recent inflation data was “a bit of an upside surprise”, which reinforced the decision to hold rates this month. While the inflation figures aren’t alarming, they were enough to push markets away from previously confident forecasts of further near-term cuts.
Markets Reprice Rate Cut Expectations
Six weeks ago, markets were confidently expecting further easing from the RBA this year. That’s changed:
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Hotter inflation data has tempered expectations.
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Economists are now divided on whether cuts will come in November.
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Bullock declined to say whether markets are “right or wrong,” but confirmed the RBA is watching the same data closely.
The next major catalysts for monetary policy are the September quarter inflation data and labour market figures, both due before the November board meeting.
Bottom Line: RBA Treads Carefully as Economy Nears Balance
Bullock noted the central bank believes the economy is “close” to achieving balance between inflation, growth, and employment — but isn’t quite there yet:
“At the moment, we think we’re close, but we don’t know. So that’s why we’ll look at this meeting by meeting based on the data.”
While the RBA is clearly cautious, it remains open to further easing if inflation continues to behave and the labour market softens further. But after this week’s upside surprise, the bar for an immediate cut has risen.
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