At its meeting this morning, Tuesday, November 4, the RBA’s Governing Council decided to maintain the cash rate at 3.60%, as expected, for the second consecutive meeting, following three rate cuts this year in February, May, and August.

The bank’s policy statement indicated that inflation has declined significantly since its peak in 2022, with higher interest rates helping to balance aggregate demand and potential supply. However, inflation has recently picked up, with the revised average inflation rate reaching 1% in the third quarter and 3% year-on-year, up from 2.7% in the second quarter. This is higher than the forecast in the August Monetary Policy Report. The Bank believes that the increase in core inflation in the third quarter was due to temporary factors. Its main projections, based on the technical assumption of a further interest rate cut in 2026, indicate that core inflation will rise above 3% in the coming quarters before stabilizing at 2.6% in 2027.

In its quarterly outlook statement, the Bank raised its GDP growth forecast for the fourth and final quarter of this year to 2%, up from 1.7% in its August forecast. It lowered its forecasts for the first and second halves of next year to 2% and 1.9%, respectively, compared to 2% and 2.1% in its August forecast.

Conversely, the Bank raised its inflation forecast to 3.3% for the fourth quarter, up from 3% in its August forecast, and to 3.7% for the first half of next year, up from 3.1%. It also anticipates a lowered average inflation rate of 3.2% for both the fourth quarter of this year and the first half of next year, compared to 2.6% in its August forecast.

There are doubts surrounding the outlook for domestic economic activity and inflation as a result of domestic and international developments. The uncertainty in the global economy continues, and with the possibility of continued inflation in some areas and stable labor market conditions, the Council decided that it was appropriate to maintain the interest rate at its current level. It emphasized that it would remain vigilant regarding the high level of uncertainty about the outlook and that the Council would pay close attention to data, the evolving risk assessment, global developments, trends in domestic demand, inflation expectations, and labor market conditions, and would do what it deemed necessary to achieve price stability and full employment.