Reserve Bank of Australia meeting today – CBA sees RBA on hold as inflation broadens

Commonwealth Bank of Australia has abandoned its forecast for another rate cut early next year, citing a broad-based resurgence in inflation that suggests the Reserve Bank will keep policy steady for an extended period.

CBA economists said the key surprise in last week’s third-quarter CPI data was how widespread the price acceleration had become across categories. Nearly half of the components in the inflation basket are now running above the top of the RBA’s 2–3% target band, up from 37% in the second quarter — and well above pre-pandemic norms.

“The cyclical upswing has occurred larger and faster than expected,” the analysts said, pointing to stronger consumer spending in their internal data as a main driver.

The bank now expects the RBA cash rate to remain at 3.60% “for a prolonged period,” scrapping its previous forecast for one last cut in February 2026.

CBA said Governor Michele Bullock’s recent comments — describing the labour market as still “slightly tight” — confirmed that the Board continues to see monetary settings as appropriately “slightly restrictive.”

The note said it would take a meaningful rise in unemployment and a clearer softening in inflation before the RBA would resume easing.

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CBA’s revised view underscores that the RBA is likely to stay cautious after Q3 CPI data showed half of all price categories running above target. The stance could dampen expectations for near-term easing and support the Australian dollar and front-end yields.

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The Reserve Bank of Australia decision is due at 0330 GMT / 2230 US Eastern time.

The Bank is widely expected to leave its cash rate unchanged at 3.6%.

Earlier previews: