The Reserve Bank of Australia held the cash rate at 4.35% in September 2026, citing easing inflation while warning of persistent services price pressures.
The Business Desk is a contributing writer covering business and public affairs for The Sydney Times.
The Reserve Bank of Australia held the cash rate at 4.35 percent in September 2026, with Governor Michele Bullock signalling that inflation is easing but warning that persistent services price pressures mean rate cuts remain unlikely in the near term.
Following its September meeting, the RBA Board decided to keep the official cash rate unchanged at 4.35 percent for a ninth consecutive month. The decision reflects a balance between moderating headline inflation and ongoing strength in the labour market.
In its post-meeting statement, the Board noted that inflation has continued to ease since its peak in 2022, with the trimmed mean measure tracking towards the top of the RBA's 2 to 3 percent target band. However, the Board remains concerned that services inflation is proving sticky, driven by strong wage growth in some sectors.
The latest quarterly CPI data showed headline inflation at 3.2 percent annually, down from 3.8 percent in the previous quarter. Trimmed mean inflation, the RBA's preferred measure of underlying price pressures, fell to 3.3 percent from 3.6 percent over the same period.
While goods inflation has moderated significantly, services inflation remains elevated at 4.1 percent annually. Rent inflation, in particular, remains high in Sydney and other capital cities, reflecting the ongoing tightness in the housing market.
The RBA cited continued strength in the labour market as a factor supporting its decision to hold rates steady. The unemployment rate remains low at 4.1 percent, while employment growth has continued to outpace population growth in recent months.
Wages growth has moderated from its peak but remains above the level consistent with the inflation target, particularly in public sector roles and industries facing skills shortages. The Board will be watching for further signs of wages growth easing before considering rate cuts.
Governor Michele Bullock reiterated that the RBA is prepared to hold rates at restrictive levels for as long as necessary to return inflation sustainably to target. Market expectations had shifted towards a potential rate cut in late 2026, but the September statement pushed back against that timing.
The RBA's forecasts suggest inflation will return to the midpoint of its target band in late 2027, assuming the cash rate remains at current levels. Any premature easing could risk reigniting inflation, particularly given the strength of domestic demand.
For Sydney homeowners with variable-rate mortgages, the decision means repayments will remain at elevated levels. A borrower with a $750,000 mortgage is still paying around $4,650 per month, roughly $1,900 more than they were paying when rates were at pandemic lows.
The hold will provide some relief for mortgage holders hoping for cuts, but most economists now expect the first rate reduction to occur in early 2027 rather than late 2026. The timing will depend on further progress in reducing services inflation over coming months.
The Reserve Bank of Australia publishes full minutes and the post-meeting statement. For the latest CPI data, see the Australian Bureau of Statistics.
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