Sydney, November 18, 2025 – The Reserve Bank of Australia (RBA) indicated on Tuesday that it may maintain the current cash rate of 3.6% for a longer period if incoming economic data continues to surprise on the strong side. However, the central bank also highlighted scenarios where further policy easing could be necessary depending on developments in the labor market and broader economy.

Minutes from the RBA’s November 3-4 policy meeting revealed that the board currently views the cash rate as slightly restrictive but acknowledged that recent increases in housing credit to investors may have altered that assessment.

RBA Holds Steady Amid Strong Economic Indicators

The RBA decided to keep its policy rate unchanged this month, following three rate cuts earlier in 2025. The central bank cited higher inflation, robust consumer demand, and a revival in the housing market as reasons for exercising caution before implementing additional easing measures.

“Members determined that they could afford to be patient while assessing what the incoming data reveal about the extent of spare capacity, the outlook for the labor market, and the degree of restrictiveness of monetary policy,” the minutes stated.

Inflation and Labor Market Insights

A surprisingly high third-quarter inflation reading prompted the RBA to forecast inflation remaining above its 2-3% target band until mid-2026, with a projected settlement of 2.6%—slightly above the 2.5% midpoint of its target range.

Concerns about the labor market have eased after employment surged in October and the unemployment rate declined to 4.3%. These developments led markets to largely price out the possibility of additional policy easing from the RBA, with only a 40% chance of a rate adjustment in May 2026.

Scenarios for Policy Adjustment

While the RBA remains cautious, it acknowledged that further monetary policy easing could be warranted if the labor market weakens materially or if the economic recovery slows more than expected. The board emphasized the importance of a data-dependent approach, noting that the likelihood of different scenarios remains uncertain.

The central bank’s careful stance underscores its balancing act between supporting economic growth and keeping inflation within target, particularly amid a recovering housing market and strong consumer demand.

Market Reactions

Global markets reflected cautious sentiment, with U.S. stocks tumbling on Monday. The Dow Jones Industrial Average fell more than 1%, while the S&P 500 and Nasdaq each lost just under 1%, highlighting ongoing investor sensitivity to central bank signals and economic data.