RBA to hold rates on September 30 but cut likely after Q3 inflation: Reuters poll

The Reserve Bank of Australia (RBA) is unanimously expected to hold its cash rate at 3.60% at its upcoming meeting, as policymakers prioritize assessing inflation and a tight labor market. While a consensus for a 3.35% year-end rate implies a future cut, accelerating monthly CPI (3.0% in August) and sustained economic momentum are prompting some economists to push back November rate cut forecasts and question the necessity of further easing, indicating a cautious and data-dependent approach to future monetary policy.

Analysis

The Reserve Bank of Australia (RBA) is poised to maintain its official cash rate at 3.60%, a move unanimously anticipated by all 39 economists in a recent Reuters poll. This cautious stance is attributed to a labor market that remains tight by pre-COVID standards and a desire to assess incoming inflation data before committing to further policy easing. Although the RBA has already delivered three rate cuts this year, an acceleration in the monthly consumer price index to 3.0% in August from 2.8% in July has introduced uncertainty into the outlook. While the consensus forecast points to a 25 basis point cut to 3.35% by year-end, conviction is weakening, as evidenced by some economists pushing back rate cut expectations and a growing minority in the poll (7 of 39, up from 1) predicting no change by the end of 2025. Major banks like ANZ, CBA, and Westpac still foresee a November cut, but NAB projects a hold until May, highlighting a significant divergence in expert opinion. The RBA's current strategy is one of data-dependency, with policymakers waiting for the full Q3 inflation report to gauge the impact of previous cuts and avoid prematurely reigniting price pressures.

Key Decisions for Investors

• Investors should treat the upcoming RBA rate hold as a non-event and focus on the forthcoming Q3 CPI data, which will be the primary catalyst for the market to either confirm or re-price expectations for a November rate cut.
• Given the rising monthly CPI and growing divergence among economists, consider hedging against a more hawkish-than-expected RBA policy path, as the risk is skewed towards fewer or later rate cuts than the current consensus implies.
• The central bank's cautious, data-dependent approach could offer near-term support for the Australian dollar (AUD) while potentially creating headwinds for rate-sensitive sectors such as real estate and technology if the market begins to price out further easing.