The Reserve Bank of Australia announced it will keep the official interest rate steady, in line with most expectations, while warning that inflation in the third quarter may be higher than anticipated. This led market participants to lower their expectations for monetary policy easing in the near future.

In its meeting today, the bank’s board confirmed the interest rate will remain at 3.6% after three cuts this year, noting continued caution about economic forecasts and that any future monetary policy changes will depend on economic data. The bank stated: “With signs of private demand recovery, indications of ongoing inflation increases in some sectors, and overall stable labor market conditions, the board decided to maintain the current interest rate level.”

The decision to hold the Australian interest rate came as some economists revised their forecasts for a fourth rate cut by the Reserve Bank of Australia, expecting it next year instead of November 2025, due to concerns over returning inflationary pressures amid ongoing labor shortages. Prashant Nionah, Senior Interest Rate Strategist for Asia-Pacific at Toronto Dominion Bank in Singapore, added: “The Reserve Bank of Australia does not want to rush decisions, yet it observes positive signs in economic activity data, rising inflation rates, housing market recovery, and labor shortages.”