Cash rate cut hopes dashed after inflation spike scare

The latest quarterly Consumer Price Index (CPI) release last week has tipped the scales away from expecting a reduction in the official cash rate by the Reserve Bank of Australia (RBA) at its meeting tomorrow, according to industry analysts.

The 12-month inflation figures released last Wednesday had edged just above the central bank’s target threshold of two to three per cent, forcing investment analysts and market commentators to quickly pivot away from making certain predictions about tomorrow’s monetary policy decision being a rate cut.

According to Finder’s RBA Cash Rate Survey of 35 experts and economists, 86 per cent now expect the central bank to hold the cash rate at 3.6 per cent – a marked change from September’s survey, which indicated 69 per cent were predicting a cut tomorrow.

“This time last month there was plenty of optimism for a rate cut in November – that’s largely evaporated,” Graham Cooke, head of consumer research at Finder, said.

“The RBA wants to see inflation sit somewhere between 2 and 3 percent, and it just edged above the top threshold.

“The RBA will want to see that number trending down again before relieving any more cash rate pressure,” Cooke said.

Approximately 66 per cent of survey respondents still expect at least one more reduction in the official cash rate in the next 12 months, with most predicting this to occur in February or May.

“The November RBA meeting is set to deliver a pause with a mildly hawkish tone. This follows the outsized quarterly inflation release which was well above the RBA’s 2%-3% inflation target band,” Carl Ang, Fixed Income Research Analyst at MFS Investment Management, said.

“The labour market is still showing signs of tightness and whilst there has been nascent softening, we think delivering on the inflation target will take precedence for the RBA.

“This favours the RBA staying on hold at the current 3.6% cash rate till mid-2026, at the very least. We expect 2026 to be a challenging year for the RBA given stagflation risks ahead, namely elevated inflation persisting and unemployment rising further.”