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The Reserve Bank of Australia (RBA) has maintained the cash rate at 3.6 per cent, a decision anticipated by economists and market participants.
However, the unexpectedly cautious rhetoric from the RBA's board and governor, Michele Bullock has prompted a rethink among analysts on the timing of future rate cuts.
Initially, economists at Commonwealth Bank predicted a rate cut in November, but now they've shifted their expectation to February following the RBA's recent tone and data releases. This adjustment comes in response to stronger-than-expected economic activity and consumer price index results, which suggest inflation might exceed the RBA's forecasts.
Belinda Allen, head of Australian economics at CBA, cited a significant uplift in trimmed mean inflation and robust consumer activity as key factors contributing to CBA's revised forecast. These indicators imply that the RBA may hold interest rates steady during the remaining meetings in 2025.
Other financial institutions are also adjusting their predictions. JP Morgan's Ben Jarman has withdrawn his call for a November rate cut, while the probability estimated by money markets has dropped from over half to approximately one-third.
Conversely, Paul Bloxham, chief economist at HSBC, retains his outlook for a rate cut in November. He acknowledges the risk of fewer cuts than previously expected and emphasises that future decisions will heavily depend on the consumer price index data set for release at the end of October.
This wait-and-see approach underscores the RBA's commitment to monitoring inflationary trends and economic data closely. For mortgage holders, this means that immediate interest rate relief may be delayed as the central bank grapples with the evolving economic landscape.
As observers await the forthcoming CPI data on 29 October, the potential for an interest rate adjustment in the coming months remains contingent on how inflationary pressures unfold.
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