The RBA is still working on the technical assumption of one more interest rate cut in 2026, but governor Michele Bullock has said ‘anything is possible’.
The governor of the Reserve Bank of Australia (RBA), Michele Bullock, has said that “it’s possible that there’s no more rate cuts”, but added that “anything is possible”.
In a post-meeting press conference following the November cash rate decision on Tuesday (4 November), the RBA governor said the Monetary Policy Board thought there were “mixed signals on the tightness of financial conditions”.
Commenting on the restrictiveness of monetary policy, she added: “We still judge we’re marginally on the tight side and that is what’s baked into the forecast, that we’ve still got a little bit of tightness, which is going to take a little bit of heat out of the economy and bring inflation back down.
“And it’s possible that there’s no more rate cuts. It’s possible there’s some more.
“All I would say is that I think we’re at the right spot we need to be at the moment, and we can respond where the risks arise.
“So if the risks turn out to be on the downside, which some people have suggested, on the employment side, we’re able to respond likewise. If the risks are on the upside, we’re able to respond.”
Earlier in the day, the RBA’s Monetary Policy Board voted unanimously to hold the cash rate steady at 3.60 per cent for November.
In the press conference, Bullock said that the board did not consider a rate cut.
“We didn’t consider cutting. We basically just talked about holding and the reasons to hold, and then discussed strategy moving out… which was that unemployment went up a little bit more than we expected but so did inflation,” Bullock said.
“So we’re being a little bit cautious here as to what we read. We think there’s a little bit of information in both.”
The RBA is still working on the technical assumption of one more interest rate cut next year, Bullock said.
Bullock acknowledged pressures from rising unemployment and inflation.
She said the board was “taking signal from stronger price increases that may suggest more inflationary pressure in the economy than we thought before.
“In particular, the cost of new dwellings and market services both increased by more than expected, and inflation in these components tends to be more persistent. At the same time, the unemployment rate has gone up,” Bullock said.
The RBA also revised its cash rate forecast, now expecting CPI inflation to be above 3 per cent for much of the next year before declining to around the middle of its 2–3 per cent target range by late 2027.
Underlying inflation will keep climbing to hit 3.2 per cent for the December 2025 quarter, the RBA forecasts, before easing in the second half of 2026.
The rate hold comes less than a week after underlying inflation accelerated to 3.0 per cent for the September quarter, to reach the top of the RBA’s 2–3 per cent target band.
The RBA next meets to discuss interest rates on 8–9 December.
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