RBA Holds Rates Steady as Services Inflation and Consumer Spending Remain Key Concerns

The Reserve Bank of Australia (RBA) decided against an immediate interest rate cut at its September policy meeting, emphasizing that future moves will depend on upcoming economic data. Minutes released on Tuesday revealed the central bank’s cautious stance, highlighting persistent inflation in services and stable employment levels. The RBA kept the cash rate unchanged at 3.60%, following three quarter-point cuts earlier this year.

Policymakers noted that while monetary policy remains “a little restrictive,” earlier rate cuts are starting to support housing demand, with increases in home prices and loan activity. Consumer spending has also shown stronger momentum than expected, although recent data hinted at potential softening in consumption trends. The board will closely watch third-quarter readings on inflation and household spending when it reconvenes on November 4.

The RBA minutes pointed to upside risks in inflation, especially within services and home-building costs, based on July and August consumer price data. Analysts believe that if core inflation rises by 0.7% or less, it could justify an easing move. However, a 0.9% or higher increase would likely deter a rate cut, while 0.8% remains a borderline scenario. Markets currently price in a 50% chance of a November cut, increasing to 70% in December, with expectations of only one additional reduction to around 3.10%.

Labour market conditions remain moderately tight, with unemployment steady at 4.2% despite slower job growth. Some board members also warned of a potential deceleration in private-sector wage gains. Externally, the RBA highlighted continued global uncertainty driven by U.S. tariffs and a weaker-than-expected Chinese economy.

The central bank reaffirmed its data-dependent approach, signaling that any rate decisions will hinge on inflation, consumer spending, and labour market performance in the coming months.