RBA Faces Tough Call as Inflation Clouds Rate Cut Hopes
All eyes are on the Reserve Bank of Australia this week, and the suspense could hardly be higher. A single figure — the nation’s quarterly inflation rate — could decide whether Aussies get a break on their borrowing costs or not. The Australian Bureau of Statistics is set to release the Consumer Price Index data for the September quarter, and what that number reveals may well determine the Reserve Bank’s next big move.
Here’s why it matters so much. If inflation comes in hotter than expected — meaning prices are rising faster than hoped — it would likely block any chance of a rate cut next week. But if the number is softer, showing inflation easing further, the door could swing open for a long-awaited cut. Right now, the odds of a November cut sit below 40%, according to Bloomberg’s market analysis, and that number could shift dramatically once the data lands.
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The Reserve Bank, under Governor Michele Bullock, has been treading a fine line. Inflation has been easing but not quite fast enough to give the central bank full confidence that it’s moving sustainably back into the 2–3% target range. Core inflation, the RBA’s preferred measure that filters out volatile items, came in at 2.7% last quarter — a touch above forecasts. It’s close to the target, but as Bullock has cautioned, “close” isn’t quite “comfortable.”
Adding to the challenge, Australia’s job market is beginning to show signs of softening, with unemployment rising to 4.5% — higher than the RBA had expected. Normally, a weaker labour market might nudge the bank toward easing rates to support growth. But sticky service-sector inflation — especially in areas like insurance, healthcare, and housing — continues to complicate the picture.
Earlier this week, Bullock delivered what markets interpreted as a blunt message: the RBA won’t be rushed into cutting rates just yet. In a fireside chat ahead of Wednesday’s data release, she noted that if core inflation were to rise by 0.9%, that would represent a “material miss” from the bank’s expectations. In other words, such a reading would make a rate cut highly unlikely.
Traders responded instantly. Bond markets dialed back bets of an imminent rate cut, and economists began warning that even a modestly stronger inflation number could delay relief for mortgage holders until 2026.
In short, the RBA finds itself on a data tightrope — caught between rising unemployment, stubborn price pressures, and growing public impatience for lower rates. The next 24 hours could determine whether Australians get a reprieve on repayments — or whether the wait for cheaper money stretches on a while longer.
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