RBA holds steady, but where do rates go from here?

On a day known for upsets, the outcome of the Reserve Bank Monetary Policy Board's November meeting this afternoon will not rank among them.

In a surprise to no-one, the Board held the official cash rate steady at 3.60%.

In many ways, the decision was all but confirmed last week when September quarter inflation data revealed a larger-than-anticipated uptick in the price of consumer goods and services.

The annual headline inflation rate of 3.2% was the highest recorded since June 2024 thanks, in part, to a jump in electricity costs.

Meanwhile, trimmed-mean inflation - which is the RBA's preferred indicator - rose to 3.0% in the 12 months to September, which is the right at the top of the central banks' inflation target band.

In its post-meeting statement, the RBA Board acknowledged the uptick in inflation, but suggested that at least some of the increase was down to temporary factors.

"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.

"Financial conditions have eased since the beginning of the year, but it will take some time to see the full effects of earlier cash rate reductions."

What's next for interest rates?

Given that the outcome of today's meeting had been widely anticipated, much of the attention surrounding the cash rate has focused on when - or if - interest rates will be cut again.

Forecasts among economists are varied. Those at CommBank, for instance, expect that the RBA will keep the cash rate at 3.60% for a prolonged period unless there's a significant rise in unemployment coupled with a drop in inflation.

That view isn't shared by Westpac economists who anticipate that the Reserve Bank will hold off until next autumn before cutting rates in May and again in August.

"Monetary policy is still somewhat restrictive," says Luci Ellis, Westpac Group chief economist, in an economic update.

"Further cuts to the cash rate next year are therefore warranted given that underlying inflation will remain within the band and be heading down in coming quarters."

In a survey of 35 economists and experts conducted by Finder before today's RBA meeting, 8% of respondents said that they were expecting a rate cut in December while 34% were anticipating a reduction in February.

"Unless something unprecedented happens, we're now looking at 2026 for the next rate adjustment," says Graham Cooke, Finder's head of consumer research.

"If inflation eases, we could see a cut early next year. Until then, homeowners will need to look to other lenders for a better deal."

The RBA Monetary Policy Board will convene again on December 8 before delivering its final cash rate decision of the year on December 9.

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