RBA Monetary Policy Decision – 30 September 2025
RBA holds rates as CPI moves uncomfortably higher
Decision Overview
The Reserve Bank of Australia (RBA) Monetary Policy Board unanimously decided to maintain the cash rate target at 3.60%, as widely anticipated by markets. This follows a series of 75 basis points of easing earlier in 2025 (including a 25 basis point cut in August), reflecting a cautious pause amid mixed economic signals. The decision aligns with the Bank’s dual mandate of achieving inflation in the 2–3% target range while supporting full employment.
Economic Context
Inflation Dynamics: Underlying inflation has continued to moderate from 2022 peaks but at a slower pace than previously assessed. Partial and volatile monthly data suggest the September quarter CPI may exceed August Statement on Monetary Policy (SOMP) expectations, prompting heightened vigilance on potential cost pass-throughs from businesses. Headline inflation remains within the target band, supported by prior tightening.
Labour Market and Activity: Conditions are easing slightly but remain tight, with unemployment low and wage growth subdued. Household spending and incomes are picking up modestly, indicating the economy is responding to earlier rate reductions. GDP growth is expected to accelerate modestly over the next year.
Global and Domestic Risks: Heightened uncertainty persists from geopolitical tensions (e.g., tariff risks), global demand fluctuations, and weak productivity. The Board emphasised balanced risks but noted policy is positioned to respond decisively to material shocks.
Forward Guidance
Governor Michele Bullock highlighted a data-dependent approach, with September quarter inflation (due October) and November labour market data critical for the next meeting. Effects of recent easing will take time to fully materialise, and while policy is “a little bit restrictive,” the Board sees no immediate need for adjustment. Markets price in ~25 basis points of easing by year-end, but the RBA stressed flexibility without committing to a path. The next full SOMP is scheduled for 4 November 2025.
Market Implications
The AUD/USD edged higher to ~0.6595 post-announcement, reflecting perceived balanced (non-dovish) tones. Borrowers face ongoing pressure on variable loans, with relief potentially delayed until 2026 if inflation surprises upward.
For the full statement, see RBA Media Release 2025-27.