PHOTO: Grim Interest Rate Forecast: No Relief Ahead for Aussie Mortgage Holders as RBA Holds Firm. FILE
🏦 Reserve Bank of Australia leaves rates on hold — and signals no cuts for at least 12 months
🏠 Australian mortgage holders hoping for a rate cut will have to keep waiting — and possibly brace for another rise.
The Reserve Bank of Australia (RBA) has kept the official cash rate steady at 3.6%, following an unexpected surge in inflation that has effectively ended hopes of further rate cuts over the next 12 months.
The unanimous decision by the RBA board marks the first firm signal that the easing cycle has paused — and could reverse if inflation remains stubborn.
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📊 Inflation Surge Shakes Confidence
RBA Governor Michele Bullock said the board did not consider cutting rates at Tuesday’s meeting.
“We basically just talked about holding, and reasons to hold,” Bullock said. “We’re a little more concerned about making sure inflation is reined in.”
According to the RBA’s Statement on Monetary Policy, the September inflation spike will linger for the next 12 months, keeping price pressures elevated well into 2026.
The RBA’s trimmed mean inflation — its preferred underlying measure — rose 1% in the September quarter, far exceeding earlier forecasts.
💬 Market Reactions: No Cuts, Maybe a Hike
Despite unemployment ticking up to 4.5%, money markets have now slashed expectations for future rate cuts. Traders currently price in less than one full cut by mid-2026, with some economists — including at Commonwealth Bank — warning that borrowers may have already seen the last cut of this cycle.
Bullock acknowledged “mixed signals” on financial conditions but stressed that inflationary risks remain.
“There’s some risk inflation could get away if we don’t stay the course,” she said.
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🔍 RBA Forecasts: No Change Until 2026
The RBA’s updated staff projections show underlying inflation holding at 3.2% until mid-2026, well above the 2–3% target band.
In August, the bank had forecast inflation would ease to 2.6% by year’s end — but the latest data has scrapped that optimism.
At face value, these numbers rule out a rate cut for at least the next 12 months, given inflation remains above target.
⚠️ Drivers of the Inflation Spike
The central bank attributed the jump in prices partly to volatile international travel costs, one-off council rate increases, and temporary data adjustments — but warned underlying pressures remain strong.
Tight labour market indicators, including low underemployment, high job vacancies, and more workers voluntarily changing jobs, all suggest capacity constraints in the economy.
“Recent data add weight to the possibility there’s more capacity pressure in the economy than previously assessed,” the RBA said.
🌏 Global Factors and Domestic Outlook
While the global economy has proven resilient — even amid U.S. tariffs under President Donald Trump — risks remain.
China, Australia’s largest trading partner, continues to grapple with a slowdown in investment, although it’s managed to diversify export markets.
At home, GDP growth is expected to rise to 2% this year, up from 1.7%, while headline inflation could climb to 3.7% by mid-2026 as government energy rebates expire.
Unemployment is forecast to hover around 4.4%, with the RBA signalling that rates may stay higher for longer to restore balance faster.
💰 The Bottom Line
For now, the RBA’s message is clear:
📌 No cuts ahead.
📌 Inflation still too high.
📌 Mortgage holders should brace for an extended pause — or even a hike.
SOURCE: THE DAILY MAIL