RBA interest rates: Reserve Bank reveals November interest rate decision is a hold at 4.35 per cent

The Reserve Bank has kept the country’s official interest rate on hold at 4.35 per cent and warned that returning inflation to target remains the top priority.

It will be “some time yet” before rising prices are under control, the board said.

That was highlighted by fresh forecasts from the bank predicting inflation would not return to the middle of its target zone, 2.5 per cent, for two more years.

RBA governor Michele Bullock said Australia had “made good progress” in slowing price rises — but underlying inflation “is still too high”.

The bank’s preferred measure of consumer prices ran at 3.5 per cent in the year to September.

“Right now we believe that settings are restrictive and we need to keep rates restrictive for the time being,” she told a press conference in Sydney.

“The board needs to be confident that inflation is moving sustainably towards the target.

“We’re watching the data closely and we’re not ruling anything in or out.”

The official interest rate had been unchanged for a full year prior to today’s meeting and markets had overnight predicted just a 5 per cent chance of a cut.

Economists at ANZ retained their view that the first move to lower rates was likely in February, as did AMP’s chief economist Shane Oliver.

Mr Oliver said the RBA had softened its tone slightly, and looked to have greater confidence inflation was heading towards target again.

Investment bank HSBC is still predicting a cut will not arrive until the second quarter of 2025.

But borrowers may be left waiting much longer.

“We see an increasing risk that it takes even longer for cuts to be delivered, or that the RBA misses the easing phase altogether,” the bank said.

“This could come about because domestic inflation continues to fall only very slowly or because, by the time domestic inflation has eased sufficiently, the global economy is already re-inflating.

“Although not our central case, we ascribe a 25 per cent chance to the possibility that the RBA does not cut its cash rate at all in 2025.”

Also on Tuesday, the RBA’s quarterly statement on monetary policy dialled down forecasts for economic growth and revised unemployment slightly upwards.

The report showed public spending had persistently surprised the central bank by running hotter than expected.

State and Federal spending growth will run at 4.4 per cent for this financial year, and expectations for the year following were also revised up.

“The staff forecast of public consumption has been revised higher several times over the past year in response to announcements of additional spending,” the bank’s notes said.

Ms Bullock was more cautious in her comments.

She said public demand was offsetting weakness in the private sector — and the impact of policies on inflation was front of mind for Treasurer Jim Chalmers.

The RBA has made major inroads in the fight against rising prices, with underlying inflation down 0.5 percentage points to 3.5 per cent in the year to September.

Headline inflation fared better thanks to a big suite of government subsidies and dropped to 2.8 per cent, in the bank’s target zone. The RBA will ignore the temporary effects of those policies, however.

The International Monetary Fund warned in recent weeks that Australia could fall behind the pack on the inflation fight, predicting prices would rise 3.3 per cent next year.

Unemployment has remained close to record lows while the jobs market has shot the lights out — more than 430,000 workers were hired in the past year.