RBA Review: Data Dependency Continues

The RBA has kept the cash rate unchanged at 3.6% in the September 30th meeting as per forecast. With headline monthly inflation edging up in the past month, it provided RBA the perfect excuse to keep rates unchanged despite trimmed mean suggest further moderation in underlying inflationary pressure. The broader picture did not change and we expect CPI to tread lower on a quarterly bases with two more cuts in the coming quarter from the RBA, bring rate to 3.1%.

The recent volatility in headline monthly CPI seems to have tilt RBA's forecast for the Q3 CPI higher and keep them at bay from cutting rates. They does not seem to be convinced the strong domestic consumption in Q2 to be fully sustainable and would like to wait for more confirmation about their outlook. The forward guidance did not change and continue to point towards data dependency. 

The timing of another 2025 cut will likely be the November meeting, to give RBA sufficient time to assess the impact of easing and Trump's tariff policy.