RBA faces crucial interest rate decision: Economists expect stability

The Reserve Bank of Australia (RBA) is likely to keep its key interest rate at 3.60% in the upcoming meeting, according to a Reuters survey of economists. Although the labor market continues to prove robust, policymakers are waiting for clear signals of decreasing inflation. While the forecast for an end-year interest rate of 3.35% is maintained, some analysts have retracted their expectations for a rate cut in November due to rising monthly inflation figures. According to the latest data, the Australian Consumer Price Index (CPI) rose to 3.0% in August compared to the previous year, after being at 2.8% in July. Throughout the year, the RBA has lowered its rates several times following the release of quarterly inflation data, leading to an increase in economic growth in the second quarter. This resulted in a relatively stable unemployment rate and gives the RBA the opportunity to slow the pace of rate cuts. Sunny Kim Nguyen from Moody's Analytics emphasizes that the RBA has no reason to rush since the labor market is still relatively tight compared to pre-COVID-19 times. Accordingly, the bank can wait for comprehensive inflation data for the third quarter before taking action to avoid prematurely reigniting price pressures. Australia's major banks—ANZ, CBA, and Westpac—are expecting a 25 basis point rate cut in November, while NAB advocates for maintaining the rate until May. More than 80% of the experts surveyed foresee a 25 basis point cut to 3.35% by the end of 2025, with seven expecting no change. Besa Deda, Chief Economist at William Buck, considers a move in November possible, but emphasizes that it is not certain and the RBA might exercise caution in light of recent data. A long-term view shows that 23 out of 38 economists expect a further rate cut in the first quarter of 2026 to 3.10%, while 13 forecast a level of 3.35% by the end of March, and two predict an unchanged 3.60%. ANZ economist Madeline Dunk warns that an unexpected rise in inflation or a strong labor market could prompt the RBA to reconsider its decision.