Ahead of the release of quarterly inflation figures, the central bank’s governor has sought to downplay the impact of one-off changes to inflation and unemployment.
Reserve Bank of Australia (RBA) governor Michele Bullock has reiterated the central bank’s cautious monetary policy stance, saying it would not “leap at a single number” in making cash rate decisions.
Speaking at a fireside chat at the Australian Business Economists’ (ABE) annual dinner in Sydney on Monday (27 October), Bullock also reasserted that economic uncertainty remains elevated, and that the RBA will remain data-dependent.
She added that the central bank’s Monetary Policy Board continues to see some tightness in the labour market.
Commenting on recent economic data, Bullock said: “On the one hand, we’ve got unemployment a little bit higher. On the other hand, we’ve got inflation a little bit higher. So I think the way the board is thinking about this is, I think they’ve used the word cautious before.”
She also hinted at possible future rate easing: “We think we’re a little bit, still a little bit restrictive. We think the neutral rates are probably a little bit below this… We just have to wait for a bit more data.”
Bullock later said: “But let’s be positive in a sense: Inflation is back in the [2 to 3 per cent] band. It’s not down at the mid-point of the target range, which is where we’re supposed to be aiming, but it is back in the band. And the unemployment rate is still pretty low compared with where it was pre-Covid. So I still think we’re in a pretty good position.”
The governor’s comments come after unemployment data for September came in higher than expected, while monthly inflation has also trended higher.
The RBA’s November monetary policy decision will likely be highly influenced by labour market data and the September quarter inflation figures, due later today (29 October).
Commenting on the upcoming quarterly inflation read, Bullock said an underlying inflation rise of around 0.9 per cent would be a “miss”, about 30 basis points above the RBA forecast.
Q3 inflation ‘ultimate determinant’ of rate call
Commenting on the next cash rate call, Commonwealth Bank of Australia’s (CBA) head of Australian economics, Belinda Allen, on Monday (27 October) said: “Given the cautious and gradual pace of easing so far by the RBA, we expect the board will want to see clear evidence that inflation is continuing to move towards the mid-point of the target band before easing monetary policy further.
“With [annual] trimmed-mean inflation expected to remain steady at 2.7 per cent, we do not anticipate the hurdle for another rate cut to be met by the November meeting.
“However, the latest labour force data has made the decision to hold or cut in November less clear cut.
“To see the RBA cut in November, the Q3 CPI would have to be unexpectedly soft, keeping in mind the rise in unemployment in September. Despite this, we remain comfortable with a hold in November, with the balance of risks to our Q3 trimmed-mean estimate being clearly tilted to the upside.”
Earlier this month, Westpac, the only major to not rule out a November rate cut, said the Q3 CPI will be the “ultimate determinant of the November decision”.
In the RBA board’s September meeting, members unanimously voted to maintain the cash rate at 3.60 per cent, as widely expected by the market.
The next cash rate announcement will be on 4 November 2025.
[Related: Markets lift bets on November rate cut]
