RBA Recap

• After a string of rate cuts this year, the Reserve Bank has hit pause at 3.60%, surprising markets with a more cautious stance as inflation proves stickier than expected and domestic demand gains momentum.
• While inflation is back within the 2–3% target range, a recent upside surprise in services prices has tempered confidence in the disinflation story and raised the prospect of a longer pause in the easing cycle.
• With the labour market holding firm and household spending recovering, the RBA faces a delicate balancing act: support growth without reigniting inflation, as markets recalibrate for a slower, shallower path of rate cuts.

The Australian Economy

• The central bank kept rates unchanged as expected, balancing modest economic growth and steady labour conditions against a mild but concerning rebound in inflation.
• August’s CPI uptick to 3.0% underscored persistent services-sector pressures, prompting markets to scale back expectations for near-term rate cuts and question the durability of the disinflation trend.
• While GDP growth remains supported by private demand, consumer caution and a cooling labour market highlight the delicate path ahead — one where the RBA must stay data-dependent to sustain disinflation without stifling momentum.

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