A major bank has suggested that Australia is at the end of its rate-easing cycle.
The market is near universally forecasting a rate cut hold next week after quarterly inflation came in higher than expected.
After the inflation data was released, the Commonwealth Bank of Australia (CBA) revised its cash rate outlook and suggested it was the end of the rate easing cycle.
The major still expects the RBA Monetary Policy Board to leave the cash rate on hold at 3.60 per cent next week in a unanimous decision, but said the “material upside surprise” to the trimmed mean inflation, and its broad‑based nature, meant it now expected the RBA to hold rates for a “prolonged period”.
CBA previously expected one last rate cut in February 2026 to bring the cash rate back closer to neutral.
However, in an economic update on Wednesday (28 October), the economics team said that given the quarterly inflation figures, it now expects the RBA to remain on hold - marking the end of this easing cycle.
"Given the material upside surprise to the Q3 25 CPI, and the broad-based nature of pricing pressures, we now expect the RBA to remain on hold from here. Previously we expected one last rate cut in February 2026to bring the cash rate back closer to neutral.
“Higher inflation and the cyclical upswing in demand now underway, driven largely by consumption and housing, will see the RBA conclude that the economy needs the cash rate to remain in slightly restrictive territory,” CBA head of Australian economics, Belinda Allen, said.
Underlying annual inflation accelerated to 3.0 per cent for the September quarter, up from 2.7 per cent in the June quarter to hit the top of the Reserve Bank of Australia’s (RBA) 2–3 per cent target band.
The change marks the first time trimmed mean annual inflation has increased since December 2022 and came amid rising electricity costs following the end of the energy rebates.
"The latest data point and the underlying details will be a genuine cause for concern [for the RBA]," Allen said.
"We expect the Governor in the press conference and the accompanying statement to revert to concern over inflation and the outlook... We expect it would take a material move higher in the unemployment rate, together with more moderate inflation prints, to bring the RBA back to the cutting table."
Westpac chief economist Luci Ellis also hinted at a possible forecast revision, saying that it is “conducting a full reassessment for the cash rate outlook in light of both the inflation outcome and the evolving picture on domestic demand”.
Ellis said the September quarter inflation was “materially above RBA’s August forecast” and drives a hold decision at the November meeting.
“But delay now adds to the chances of more cuts next year,” she said.
Even a February cut is “far from certain now”, given the size of the upside surprise this quarter, Ellis added.
“Inflation data implies a ‘material miss’ to the upside on inflation. RBA Monetary Policy Board will therefore keep the cash rate on hold at its November meeting. The upside surprise and emerging consumer recovery also count against a December move,” Ellis said.
Earlier this week, the RBA governor characterised a trimmed mean reading of 0.9 per cent on the quarter as “a material miss”.
Australia and New Zealand Banking Group (ANZ) senior economist Adelaide Timbrell said the trimmed mean reading “solidifies” a hold next week.
“The result is likely much higher than the RBA’s forecast for Q3 trimmed mean inflation,” she said.
“This is likely to lead to caution from the RBA on future easing until evidence of disinflation emerges.”
ANZ expects the RBA to hold the cash rate until at least February 2026 and is forecasting a unanimous RBA decision to hold next week, despite the recent rise in the unemployment rate.
National Australia Bank (NAB) senior markets economist Taylor Nugent said the lender "continues to expect an extended pause from the RBA, pencilling in a May cut".
GDP and employment data ahead of the December meeting would have to be "particularly weak to put a cut back in play this year", he added.
Bendigo Bank chief economist David Robertson said the unexpected jump in core inflation “makes it very difficult for the RBA to cut rates any further this year – despite the recent uptick in unemployment”.
He added: “A cup day cut is now at best around a 1 in 12 chance, having been an odds-on favourite a few days ago.”
Bendigo’s revised forecasts have one more RBA cut, but not until February 2026.
[Related: Inflation accelerates, dimming hopes of November rate cut]
