Steady Hand in Sydney: RBA Holds Cash Rate at 3.60% as Inflation Watch Continues
In a widely anticipated but crucial decision for the Australian economy, the Reserve Bank of Australia (RBA) Monetary Policy Board today confirmed its commitment to a Steady Hand in Sydney, choosing to leave the cash rate unchanged at 3.60 per cent.
This RBA Holds Cash Rate decision marks the second consecutive meeting where the board has paused its tightening cycle, signaling a strategic shift toward assessing the full, delayed impact of the eleven prior consecutive rate hikes on Australian households and consumption.
The move provides a moment of stability for mortgage holders and businesses grappling with high inflation, yet analysts caution that the pause is conditional, with the central bank maintaining a resolute stance against any resurgence in price pressures.
The RBA’s cautious stance reflects a global trend of central banks balancing the need to tame inflation without triggering an unnecessary recession.
The decision was finalized by Governor Michele Bullock and the RBA board, which emphasized that the Monetary Policy Board remains dedicated to ensuring inflation returns to the target band of 2-3 per cent.
However, the current strategy is shifting from aggressive front-loaded hikes to a more patient “wait-and-assess” approach, relying on the substantial cumulative tightening already delivered to slow demand across the economy.
Headline Points: The RBA’s November Decision
• Cash Rate Stays: The official cash rate is held at 3.60 per cent, the second consecutive hold after eleven consecutive increases.
• Rationale: The RBA seeks time to evaluate the full impact of previous hikes on household budgets, consumer demand, and the labour market.
• Inflation Outlook: The bank acknowledged that headline inflation remains elevated but is now expected to have peaked and is on a slower, but definite, trajectory back toward the target band.
• Labour Market: The Australian employment market remains exceptionally tight, a key factor supporting household income, but there are now tentative signs of easing, such as a slowdown in job advertisements.
• Forward Guidance: The RBA’s statement retained a hawkish bias, indicating that “some further tightening of monetary policy may be required,” underscoring that the pause is not a signal that the cycle is over, but rather a tactical break.
The Domestic Economic Tightrope Walk
The RBA’s pause is a direct reflection of the tightrope walk currently underway in the Australian economy.
On one side, wage growth has begun to accelerate, providing much-needed relief to workers but raising concerns about a wage-price spiral—a phenomenon the RBA is keen to avoid.
On the other side, the heavy burden of mortgage repayments is beginning to bite. Australia has one of the highest levels of household debt globally, and the rapid rise in rates has squeezed disposable income significantly.
The central bank’s analysis confirms that consumption growth has slowed sharply, a clear indication that previous rate hikes are filtering through the economy as intended.
A key concern for the board is that moving too aggressively could cause an unnecessary contraction in the labour market, undoing the substantial employment gains made in recent years.
“For Australian households, this pause provides essential stability,” said Dr. Eleanor Vance, Chief Economist at Sydney’s Zenith Group. “It offers an opportunity for people to recalculate their budgets without immediate rate shock.
The RBA is essentially testing whether the current settings are restrictive enough to cool demand without causing widespread job losses. It’s a delicate balancing act focused on maximizing the chance of a soft landing.”
Global Headwinds and Domestic Resilience
The RBA’s decision also takes cues from the evolving global economic outlook. While inflation pressures from international sources, such as energy and goods prices, have generally eased, the global environment remains uncertain.
The central bank is monitoring the resilience of trading partners, particularly the recent developments in the US-China trade relationship, which, as reported in CJ Global, saw a temporary de-escalation with the lifting of rare earth export controls and a truce on semiconductor retaliation. Such stability is crucial for commodity-exporting nations like Australia.
However, the domestic component of inflation—driven by non-tradable sectors like services, utilities, and rents—remains stubbornly high. This stickiness in domestic prices is the primary reason the RBA maintains its hawkish stance, refusing to rule out further rate increases.
Market Reaction and The Path Ahead
Financial markets had largely priced in the November hold, leading to a muted immediate reaction in the Australian dollar (AUD) and bond yields. Attention has now firmly shifted to the RBA’s forward guidance and the next batch of economic data, specifically the upcoming quarterly inflation figures.
The consensus among analysts is that the RBA is now firmly in a data-dependent mode. Any decision to hike again will be strictly contingent on data suggesting that inflation is not cooling fast enough, or that the labour market is failing to ease from its historically tight levels. Conversely, a sustained drop in inflation coupled with further slowing in consumer spending could cement the pause and shift the discussion toward the timing of the first rate cut, though that possibility is still many months away.
For the time being, the RBA has opted for patience, allowing the accumulated weight of its previous actions to work through the economy. The current cash rate at 3.60 per cent represents a high-water mark for rates in this cycle, providing a crucial test of whether Australia can successfully navigate the global inflation wave without sacrificing employment.
