Another major bank has pushed back its timings for the next cash rate reduction, after the Reserve Bank held the official cash rate for September–October.
Following discussions on 29 and 30 September, the Monetary Policy Board of the Reserve Bank of Australia (RBA) unanimously opted to maintain the official cash rate at its current rate of 3.60 per cent on Tuesday (30 September), as widely expected by market.
All four of Australia’s major banks predicted that the central bank would maintain its current settings, after having dropped the cash rate to its lowest level in two years just six weeks ago. Similarly, on Monday (29 September), the ASX 30 Day Interbank Cash Rate Futures was trading at 96.41, indicating that just 4 per cent expected the interest rate to decrease to 3.35 per cent.
In its post-meeting statement, the RBA monetary policy board said: "With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the board decided that it was appropriate to maintain the cash rate at its current level at this meeting.
"Financial conditions have eased since the beginning of the year and this seems to be having some impact, but it will take some time to see the full effects of earlier cash rate reductions.
"The board judged that it was appropriate to remain cautious, updating its view of the outlook as the data evolve."
The monetary policy board also noted that private consumption is "picking up"as real household incomes rise and measures of financial conditions ease, and that the housing market is "strengthening".
According to the RBA, the strength of the housing market is "a sign that recent interest rate decreases are having an effect" and that "credit is readily available to both households and businesses".
It concluded: "The board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
"The board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome."
When will the next rate cut be?
The decision comes after monthly inflation data came in a little higher than expected, while the number of people in unemployment has also been falling recently.
The strength in the economy resulted in National Australia Bank (NAB) revising its forecast to suggest that the next rate cut will not come until next year.
Adam Brown, the head of broker distribution at NAB, commented: “With the RBA holding rates today, households have a degree of stability as they plan for the months ahead.
“Consumer confidence is gradually lifting, and we expect the cash rate to remain on hold until May 2026.”
Following the RBA's move on Tuesday, the Commonwealth Bank of Australia (CBA) also changed its forecast - stating that the next rate cut will not come until February 2026. It was previously forecasting a rate cut this November (when the RBA monetary policy board next meets).
CBA's economics team said it had revised its rate forecast given the RBA's statement was "a little more hawkish than we expected".
"Given the cautious and gradual easing cycle so far, we expect the RBA will want to wait and see evidence that inflation continues to head towards the mid‑point of the target band before easing further. By February, the Q4 CPI print will be available, as will further evidence of how the economy has responded to the three rate cuts to date.
"With a lift in trimmed mean inflation for the quarter and better activity data, led by the consumer and a still resilient labour market, we feel there are enough reasons to see the RBA remain on hold in the two remaining meetings in 2025," the economics team said.
They warned that while the risks are building of a longer period with rates on hold, "one last rate cut is not guaranteed."
Westpac's chief economist Luci Ellis also said that a November rate cut was "far from assured", but still believes "the choice is still when to cut further, not whether".
ANZ has maintained its call for a November cash rate reduction, followed by a sustained period where the cash rate will be held at 3.35 per cent.
Meanwhile, AMP Bank's chief economist Shane Oliver said that a November rate cut was still on the horizon, but was a "very close call".
"We see September quarter trimmed mean inflation being close enough to RBA forecasts to allow another rate cut in November but concede it’s a very close call," he said.
"Beyond that we are forecasting one more rate cut in February taking the cash rate to a bottom of 3.1 per cnet. The risks are high that further rate cuts are delayed into next year or we get even less cuts than expected."
What does the broking industry think?
Several leaders of the broking industry have also voiced uncertainty about near-term rate reductions.
Mark Haron, executive director at Connective, said while some may believe the decision to hold is “excessive given weak GDP growth, subdued consumer sentiment and households remaining under pressure”, he believed it was “unlikely that we will see another rate cut this year”.
“Brokers should help clients prepare for that possibility as it may spark a wave of buyer activity and refinancing decisions as the spring season gathers pace,” Haron said.
The Connective executive director noted that home loan activity has been strong, with the wholesale aggregator’s half-year results showing that residential settlements surged 24.5 per cent in the June half (compared to the prior comparative period) to $49.8 billion.
“It is clear that borrowers are re-engaging with the market despite affordability constraints and a shortage of property stock that continues to keep prices high,” Haron said.
“Refinancing also remains a critical theme and borrowers are increasingly willing to switch lenders who do not pass on rate cuts quickly.”
Similarly, Finsure CEO Simon Bednar said he had expected the central bank to hold rates steady at this meeting and added it was unclear whether there would be any more rate reductions this year.
Noting that the monthly inflation figure showed that inflation had risen in the year to August, he said this was “not enough to prompt the RBA to emotionally react and increase rates”.
“I believe the RBA will take a wait-and-watch approach to see how this trends leading into Christmas,” he said.
“Labour markets are still tight so, on the flip side, there won’t be a reduction either,” he added and flagged that the RBA has already cut rates three times this year.
“The latest inflation figures have prompted major banks to revise their forecasts with NAB pushing back its prediction for the next easing of official interest rates to May 2026.
“The onus remains on mortgage brokers to help clients navigate the various scenarios and reaffirm their position as a trusted financial partner.”
In the same vein, Anthony Waldron, the CEO of brokerage Mortgage Choice, commented that while the RBA decision was “expected given the latest economic data on inflation and unemployment”, he added that the economic outlook is “uncertain”, and that “tightness” remains in the labour market, which could put upward pressure on inflation.
“I anticipate the board will be waiting to see the September quarter Consumer Price Index [set to be released on 29 October] to be certain inflation is staying on track,” Waldron said.
“The RBA has been clear that it is taking a longer-term view when making decisions about the cash rate.”
Reacting to the rate decision, the CEO of the Mortgage & Finance Association of Australia, Anja Pannek, commented that while borrowers "would have welcomed a cut to interest rates without a doubt", brokers were finding plenty of opportunities to assist clients with refinancing or repricing.
She flagged the MFAA's recent August 2025 Member Sentiment Survey revealed that brokers believed the overall financial outlook of their clients had improved, particularly following interest rate cuts earlier this year.
“We are also seeing a significant improvement in refinancing conditions – with brokers reporting these are more favourable than they have been in several years," she said, adding that “99 per cent of brokers had helped clients secure a discount or refinance to a new lender".
Pannek suggested that borrowers who may have struggled to refinance in the past or haven't reviewed their home loan recently should talk to their broker.
The next cash rate decision will take place on 4 November, with another being held on 9 December.
More to come.
[Related: RBA slashes cash rate to lowest level in over 2 years]
