RBA keeps rates on hold as inflation gallops ahead

The Reserve Bank of Australia has held the cash rate steady at 3.6% in November following hotter-than-expected inflation data, delivering a blow to households hoping for a Melbourne Cup Day cut.

Higher-than-expected inflation figures released last week showed the Consumer Price Index (CPI) surged 1.3% during the September quarter to an annual rate of 3.2%, above the RBA’s 2-3% inflation target.

The RBA’s preferred measure of inflation, the trimmed mean – which strips out one-off and volatile price movements – also rose a full percentage point during the quarter to an annual rate of 3%, which is at the top end of its inflation target.

A surprise lift in the unemployment rate to 4.5% in September had fuelled expectations the RBA could deliver another cut this year, though RBA governor Michele Bullock hosed down these concerns during an appearance last week, saying she won’t “leap at a single number” given monthly data can be volatile.

Since the bank’s last meeting five weeks ago, consumer spending has continued to strengthen.

In a press conference following the decision, RBA governor Michele Bullock said the RBA did not consider a rate cut at this month’s meeting.

“We basically just talked about holding and the reasons to hold, and then discussed strategy moving out – depending on what way,” Ms Bullock said.

“Naturally, the board are concerned about employment as well because that is part of their mandate, but I would say at the moment we are a little more concerned about making sure we get inflation sustainably back in the band.”

She said the oversized jump in inflation during the September quarter would impact the annual inflation rate for the next 12 months, meaning inflation would remain above its 2-3% target range.

“So [inflation] will have a three in it, which is not ideal.”

At its meeting today, the Board decided to leave the cash rate unchanged at 3.60 per cent.

Read the full statement here: https://t.co/a0knswZloW pic.twitter.com/nyKR5tb1Ad

— Reserve Bank of Australia (@RBAInfo) November 4, 2025

Ahead of the decision, financial markets had priced in just a 7% chance of a rate cut in November, while economists at the major banks no longer see a chance of another cut this year.

REA Group senior economist Eleanor Creagh said the RBA has signalled a watchful pause following the shock inflation data, though a pause won’t be enough to keep a rate on home price growth.

“The RBA will need clear evidence that inflation pressures are easing before cutting rates again. The Bank remains cautious and data-driven, but mindful that policy is already restrictive and the labour market is gradually cooling,” Ms Creagh said.

It comes a day after PropTrack data showed national home prices rose for a 10th straight month in October to a new record high, with the previous rate cuts fuelling borrowing power and buyer sentiment.

“Interest rates have moved lower this year, easing pressure on households and lifting confidence throughout spring,” she said.

“That has helped extend the national upswing to a tenth straight month, with home prices now 7.5% higher than a year ago, the fastest annual pace since May 2024.”

Whiplash for borrowers

While a hold has been firmly on the cards for the past week, expectations for whether rates could be cut have been up and down throughout October.

Lenders and economists had largely predicted the bank’s 2025 rate cutting cycle would be forced to an end after the bank’s September meeting.

Economists at National Australia Bank now don’t see another rate cut until mid next year, while CBA has ruled out any more cuts this cycle.

The market’s hottest period has also been tempered by seller and buyer uncertainty as tightness in the labour market persists. The RBA’s forecasts for the economic path ahead have also looked less and less certain in recent weeks.

As the nation heads into the traditional Black Friday and Christmas spending period, Ms Bullock will be keeping a close eye on consumer activity and what impact that will continue to have on inflation heading into next year.

House prices soar

Ms Bullock has continued to raise concerns around high housing costs in Australia in recent months, with values having now reached another record high.

PropTrack’s Home Price Index for October shows the market is still on an upwards trajectory. Home prices rose 0.6% in October, extending the upswing to a tenth straight month and lifting values 7.5% higher than a year ago.

Sydney and Brisbane remain the most expensive capital cities in which to buy a home, with median values of $1.2 million and $976,000 respectively.

With prices on the rise, Mortgage Choice chief executive Anthony Waldron said the recent expansion of the government’s Home Guarantee Scheme could also unsettle the RBA’s expectations for the market.

An increased number of buyers are now vying to snap up homes, with the scheme now allowing buyers on all salaries to access the market with a deposit as low as 5%.

“Competition in the property market ramping up,” Mr Waldron said. “On one side, you have a new group of first home buyers motivated to get their foot on the property ladder thanks to the expanded government’s 5% deposit scheme.

“And on the other side you’ve got investors, with both groups often going after the same properties.

“My message to anyone looking to buy is simple: don’t wait for the RBA. A rate cut may not come until the RBA is satisfied that the Consumer Price Index is firmly within its target range.”

Will there be a December cut?

If rates are cut in December, it will mark the first time Aussies have seen four cuts in one calendar year since 2012. However, the bank rarely changes the cash rate in December due to the instability of spending over the month.

Any movement, cut or hike, could create unnecessary volatility meaning borrowers will more than likely be left waiting into the new year.

The bank will meet for its last cash rate decision of the year on 9 December.

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