RBA's Early Christmas Gift: From Sure Thing to a 50-50 Possibility

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A mere matter of weeks ago, experts were expecting an early Christmas present from the RBA.

Now, it’s just as likely that Michele Bullock and her board instead decide to play the part of the Grinch.

Following yesterday’s widely expected hold, economists are uncertain about whether the cash rate will deviate from its current level of 3.60 per cent before the end of the year – something that had recently seemed likely.

Governer of the Reserve Bank of Australia Michele Bullock, speaks at a media conference on Monetary Policy Decision, Sydney, 30 September 2025. — Michele Bullock was noticeably guarded in her press conference yesterday. (Jessica Hromas)

Today, Commonwealth Bank pushed back its forecast for a cut.

Having previously tipped more relief to be handed down in November, it’s now not expecting any change until next February.

“It’s no surprise CBA has run the ruler through the chance of another rate cut this year,” Canstar data insights director Sally Tindall said.

“While borrowers are hoping for more relief, the battle with inflation has not been a straightforward one, which means the cash rate could stay on hold for the rest of this year.”

RBA Governor Bullock was noticeably guarded about the future of interest rates in her post-decision press conference yesterday, a far cry from August, when she signalled further monetary policy relief was likely.

On the back of that caution, CBA isn’t the only institution where economists have pared back their expectations for a cut before Christmas.

Late yesterday, the market was pricing in a 42 per cent chance of a cut in November, down from 58 per cent the day before.

That figure sat at 95 per cent less than two weeks ago.

“Both the policy statement and Governor Bullock’s comments at the press conference were cautious and non-committal about the outlook, keeping all options open,” Westpac senior economist Mantas Vanagas said.

“Following the RBA decision, markets now assign only a 50 per cent probability to a cash rate cut this year, down from roughly two-thirds prior to the meeting.”

A man uses a Commonwealth Bank of Australia ATM in Sydney, Australia, April 19, 2018. — Commonwealth Bank, like NAB, is now forecasting the next cut won’t come until 2026. (Reuters/Edgar Su/File Photo)

The Reserve Bank’s monetary policy board have two more opportunities to hand down a pre-Christmas cut: Melbourne Cup day on November 4, then its final meeting of the year, which finishes on December 9.

Even if the cash rate remains at 3.60 per cent after those two decisions, many economists do still expect a further cut sometime next year.

“This was a remarkably non-committal set of communications, making no mention of the previous forecasts being predicated on further cuts to the cash rate,” Westpac chief economist Luci Ellis, who is still forecasting a cut next month, said.

“The governor mentioned that monetary policy is ‘still a bit restrictive’ in the media conference but there was no clear mention of the stance of policy in the post-meeting statement…

“The monetary policy board is clearly trying to give itself maximum optionality for the next few meetings.

“This means that our current base case of a cash rate cut in November is far from assured, though neither is it off the table.”

Ben Allen rides Electric Impulse to win race 6, the Melbourne Cup Carnival Country Final during Oaks Day at Flemington Racecourse. — Economists are uncertain about whether the RBA will hand down a cut on Melbourne Cup day. (Getty)

With last week’s unexpectedly hot monthly inflation data suggesting prices could be starting to rise far quicker than expected, the next instalment of more reliable quarterly data – due late this month – will be crucial in determining whether the Reserve Bank hands down a pre-Christmas cut.

“Our forecasts are unchanged for a ‘shallow’ RBA easing cycle back to a more neutral rate around 3.25 per cent, but the timing of the next cut is under question,” Bendigo Bank chief economist David Robertson said.

“The full quarterly CPI numbers out on October 29 will be the key event to verify this timing.

“So, barring a significant jump in core inflation, the easing cycle should continue.

“But it’s a complex environment. The RBA governor did warn in her press conference that ‘inflation may be persistent’. Time will tell.”

Luci Ellis, Chief Economist, Westpac Banking Group at the Australian Financial Review Banking Summit held at The Hilton Hotel in Sydney on March 18, 2025. — Westpac chief economist Luci Ellis is still predicting a cut in November, although has admitted it’s far from certain. (Dominic Lorrimer)

However, Ellis said there may be a welcome silver lining if Bullock and her monetary policy board do keep interest rates on hold for the rest of the year.

“The longer the (board) delays further cuts, the more likely it is that it will end up cutting by more than it currently envisages.”

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