As expected, the Reserve Bank of Australia (RBA) has kept the cash rate steady at 3.6%^[1]. Its board unanimously agreed it was better to “remain cautious” on interest rates.

While borrowers may have been hoping for rate relief, the decision came as little surprise to economists and markets, after stronger-than-expected inflation data^[2] – something the board’s statement emphasised, along with local and global uncertainty.

“Inflation has fallen substantially since the peak in 2022 […] but more recently, inflation has picked up,” the board noted^[3], describing the September quarter figures released last week as “materially higher than expected”.

For many mortgage holders, this marks another month of frustration. Three rate cuts earlier this year^[4] offered some respite, but not enough to offset the sharp rise in interest rates since the tightening cycle began in mid-2022.

There is another RBA meeting in early December^[5]. But today’s board statement suggest borrowers have longer to wait for any further relief.

Don’t expect a rate cut soon

Financial markets and the major banks share the RBA’s cautious tone. The big four banks were already expecting the next rate cut in 2026^[6], reflecting their view that inflation will take longer to return comfortably to target.

Market pricing also points to a prolonged pause. Traders have scaled back expectations of near-term easing, and interest rate futures now imply only modest reductions through next year.

Some economists are even warning^[7] the RBA might be forced to raise rates, either next year or in 2027^[8].

In short, the era of cheap money isn’t returning quickly.

Inflation still running hot

The latest inflation data released last week showed headline inflation back above the RBA’s 2–3% target band, and the bank’s preferred measure – the trimmed mean – sitting right on the upper edge of that range. Prices are still rising faster than the RBA is comfortable with.

While prices for some goods, such as furniture and electronics, have eased, costs for housing, insurance, health care and education continue to rise. This persistence explains why the RBA is reluctant to loosen policy.

As the latest board statement put it:

the recent data on inflation suggest that some inflationary pressure may remain in the economy […] 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.

The bank has repeatedly said it needs sustained evidence that inflation is moving towards the midpoint of its target. For now, that evidence is still missing – and today’s decision reinforces that message.

Growth and jobs show resilience

Economic growth remains modest but stronger than expected. The Australian Bureau of Statistics’ gross domestic product figures^[9] show the economy grew 1.8% over the year to June 2025 – the strongest result in two years and well above expectations.

Growth continues to be supported by business investment and population gains. Household spending, though soft, hasn’t collapsed despite cost-of-living pressures.

The labour market also remains firm. Unemployment has ticked up but is still low at 4.5% in September^[10].

Ahead of today’s board decision, RBA Governor Michele Bullock also said^[11] the jobs market remains “a little tight”, meaning many businesses are struggling to find workers – a factor that keeps upward pressure on wages and prices.

Until the bank sees clearer signs of cooling – such as slower wage growth or a sustained lift in unemployment – it is unlikely to risk cutting rates.

Bullock has stressed that future moves will depend on the data. With the next quarterly consumer price index data^[12] due out in early January, the bank will be watching for clearer signs that inflation in both goods and services is easing.

The bigger picture

Overseas, the US Federal Reserve cut its policy rate at its October 2025 meeting, bringing the target range to 3.75–4.0%. Yet Fed Chair Jerome Powell struck a hawkish tone^[13], warning further cuts aren’t guaranteed and will depend on incoming data.

That cautious stance mirrors the RBA’s own. Both central banks want to avoid declaring victory over inflation too early, especially with ongoing risks from energy prices, supply disruptions and tight labour markets.

With the European Central Bank and Bank of England also adopting a wait-and-see approach^[14], the RBA remains broadly in step with its global peers.

For now, the bank sees more risk in moving too soon than in waiting a little longer. A premature cut could reignite price pressures and undo the progress made since 2023.

For homeowners, that means high borrowing costs are likely to persist for some time yet. It’s a disappointing Melbourne Cup Day for mortgage holders – but for the RBA, caution still wins the race.

References

1. ^{^} steady at 3.6% (www.rba.gov.au)
2. ^{^} inflation data (www.abs.gov.au)
3. ^{^} board noted (www.rba.gov.au)
4. ^{^} Three rate cuts earlier this year (www.rba.gov.au)
5. ^{^} in early December (www.rba.gov.au)
6. ^{^} in 2026 (www.smartpropertyinvestment.com.au)
7. ^{^} warning (www.afr.com)
8. ^{^} next year or in 2027 (www.abc.net.au)
9. ^{^} gross domestic product figures (www.abs.gov.au)
10. ^{^} is still low at 4.5% in September (www.abs.gov.au)
11. ^{^} also said (www.bloomberg.com)
12. ^{^} quarterly consumer price index data (www.abs.gov.au)
13. ^{^} hawkish tone (apnews.com)
14. ^{^} wait-and-see approach (www.ecb.europa.eu)