RBA Preview: A hold expected amid inflation risks, weakening labour market

The Reserve Bank of Australia (RBA) meets on Tuesday, 30 September, with markets widely expecting the cash rate to remain unchanged at 3.60%.

Signs of labour market weakness increase

The decision will arrive against a backdrop of mixed data and a cautious approach from policymakers. The latest labour force data pointed to deterioration in hiring conditions. Employment fell by 5,000 in August, while the unemployment rate held steady at 4.2%. The figures add weight to concerns that the jobs market is beginning to cool after two years of tight conditions. For the RBA, this is a signal that policy is working to restrain demand, but it also raises the risk that the downturn in activity could become more pronounced if left unchecked.

Inflation in focus amid potential price stickiness

While the labour market weakens, inflation dynamics complicate the picture. The ABS CPI indicator showed headline inflation lifting to 3% in August, the top end of the RBA’s 2–3% target band. However, the more policy-relevant trimmed mean measure eased to 2.6%, suggesting underlying price pressures are more moderate. The data has prompted concerns that inflation will prove stickier than expected. Given recent for, the markets believe the RBA may wait for more definitive evidence from the full quarterly CPI release at the end of October before reassessing its stance. From November the ABS will publish the full CPI index monthly, providing the RBA with timelier insights to set policy more confidently.

Upside inflation risks defer timing of next rate cut 

For now, futures markets are pricing only a slim chance of a rate cut at this decision, with probabilities sitting in the low single digits. A run of stronger-than-expected CPI indicator reports has already pushed back the expected timing for the first easing to March 2026, compared to December 2025 just weeks ago. Beyond that, pricing implies uncertainty about the RBA’s capacity to cut rates aggressively. A second cut after March is seen as a coin toss at best.
AUD/USD remains in uptrend but upside momentum slows

Courtesy of a weakening US Dollar, the AUD/USD has been in an uptrend throughout 2025, although momentum has recently turned bearish on the daily RSI. The pair hit a 10-month high in September, cleanly pulling back after testing upward sloping trendline resistance. That resistance line and the higher-high at just above 0.6700 represent the two major levels on the upside for the AUD/USD. The 0.6400 handle could be a critical level of support.


(Source: Trading View)
(Past performance is not a reliable indicator of future results)