Australia’s central bank has kept the official cash rate steady at 3.6%, responding to persistent inflation pressures that remain elevated. This move aligns with economist forecasts following the latest inflation data showing the fastest increase since mid-2024.
Headline inflation rose 3% in August, driven mainly by housing, food, and alcohol price rises. After cutting rates by 75 basis points earlier this year from 4.35%, the Reserve Bank of Australia (RBA) chose to pause amid signs that inflation could be higher than expected this quarter.
“Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the August Statement on Monetary Policy,” the RBA stated.
Private demand is recovering, supporting inflation, though economic outlook remains uncertain, shaped by international developments.
“The global environment is particularly uncertain and unpredictable, but monetary policy is well placed to respond if it seems international developments could have a material impact on Australia’s economy,” RBA Governor Michelle Bullock said.
In the second quarter, Australia’s economy grew 1.8% year-on-year, surpassing expectations and building on previous growth. Domestic spending, including household and government consumption, was the primary growth driver, according to the Australian Bureau of Statistics.
Despite encouraging growth, risks such as geopolitical tensions, supply chain issues, and labour market pressures may sustain inflationary challenges. The RBA’s cautious hold suggests openness to further action depending on future inflation and economic data, balancing price stability with ongoing recovery efforts.