RBA: RBA On Hold, Remains “Vigilant”, Nothing Ruled "In or Out"

The RBA kept rates unchanged at 4.35% as was unanimously expected. The hawkish hold tone was maintained with the key changes in the September statement only updates for the data released since the August meeting. Expect Governor Bullock to reiterate in the upcoming press conference at 1530 AEST not to expect easing in the “near term”. 

• There was greater emphasis on the temporary nature of the current decline in headline inflation. The RBA noted that “underlying inflation is more indicative of inflation momentum”. Underlying inflation is not expected to “sustainably” return to target until 2026.
• Inflation “remains too high” and the Board will continue to be “vigilant to upside risks to inflation”, while “not ruling anything in or out”. As a result, rates will need to stay “sufficiently restrictive until the Board is confident that inflation is moving sustainably towards” target.
• The statement included more details on the labour market than usual. It said that it is tight and there are “some signs of gradual easing” but observed the stabilisation in hours worked, a record high participation rate and elevated vacancies.
• The board acknowledged the “weak” Q2 GDP/consumption outcome but said that spending by tourists and students was more resilient than residents who had cut back on discretionary spending due to previous declines in real disposable income and higher rates.
• Uncertainties around the outlook persist, especially from overseas, and risks in both directions around consumption were discussed.