Reserve Bank of Australia deputy governor Andrew Hauser hints at no more rate cuts in 2025

Reserve Bank of Australia deputy governor Andrew Hauser has hinted there will be no more interest rate cuts this year but suggested there could be more relief in 2026 if inflation moderated.

Mr Hauser said rate cuts in February, May and August would start boosting the economy in the final months of 2025, leaving no need for more relief before Christmas.

“The normal lags in monetary transmission mean those cuts won’t have had much impact on activity during the first half of 2025,” he said.

“But they will play an important role in supporting growth from late 2025 as the impulse from public demand and last year’s tax cuts wanes.”

None of Australia’s big four banks is expecting the RBA to cut rates at its next two-day meeting on December 8 and 9.

Inflation in the year ended September 30 rose 3.2 per cent, which is above the RBA’s 2-to-3 per cent target.

“Monetary policy must be set not through the rearview mirror but in anticipation of where the economy is going in the future,” he told the UBS Australasia conference in Sydney on Monday.

“For inflation, that depends on the balance of demand and supply – and here we find ourselves in an unusual place.”

Mr Hauser said another rate cut in 2026 was still a possibility should inflation moderate in the final months of 2025, which would be in line with the futures market forecast.

“As I’ve set out today, there is room to debate what that means for the precise stance of monetary policy in the near term,” he said.

“Our latest projections show inflation settling very slightly above the midpoint of the 2–3 per cent target range if the cash rate follows a market-derived path of one more 25 basis point cut.”

The RBA this month updated its forecasts to have headline inflation hitting 3.7 per cent by June 2026 for the first time in two years.

Headline and underlying inflation weren’t expected to settle at the mid-point of the 2-3 per cent target until at least early 2028.

The Reserve Bank left the cash rate on hold at 3.6 per cent this month, coinciding with Melbourne Cup day, for the second consecutive meeting.

Mr Hauser’s speech on Monday was titled On The Rail or Off To The Races.

In the question and answer session, he said it was “another mug’s game” determining the neutral RBA cash rate level where it was neither stimulating nor restricting economic activity.

But he suggested the global cash rate started with a ‘four’, which was where the RBA level was until the May easing.

“It is possible to write down a neutral rate that is, what about ‘four’. You would think we’re on the easy side of that now,” he said.

“There is a huge range around this number. I know you want numbers but I’m not going to answer this question.

“We’ll see how tight or loose policy is by judging the outcomes of the macroeconomy.”