The Reserve Bank of Australia has held the cash rate for a third time in a row as a surge in inflation has effectively killed hopes for near-term cuts.
Australia’s cash rate has remained on hold at 3.6 per cent since rates were last cut in August.
It follows inflation rising 3.8 per cent in the 12 months to October, while the unemployment rate remained near historic lows at 4.3 per cent.
The RBA said the recent data shows there continues to be upside risks to inflation, but it will take longer to analyse the “persistence” of these pressures.
It also stressed that some of the recent increases in trimmed mean inflation were due to temporary factors.
Power prices jumped 37 per cent throughout the period after rebates rolled off, and housing costs lifted almost six per cent.
This has pushed the case for the RBA to lift rates next year.
All 35 experts polled by comparison site Finder predicted the RBA would maintain the cash rate, but about one in three have forecasted a rate hike next year.
Finder’s head of consumer research Graham Cooke said attitudes about rate moves had shifted rapidly in recent times.
“Just a few months ago, another rate cut looked within reach. Now, we have the most divided panel I’ve seen in years,” Mr Cooke said.
“Nobody knows which way the RBA will go next.”
While inflation was up in the year to October, it was unchanged on a monthly basis while power prices were down about 10 per cent.
Electricity prices will rise next year as the government on Monday revealed it will not extend its rebates.
The RBA has cut rates three times since the beginning of this year and follows it holding rates at 4.35 per cent to stamp out post-pandemic inflation.
Rates were hiked 13 times between May 2022 and November 2023 as inflation surged.
Prior to the RBA handing down its rates decision, money markets said there was a 99.9 per cent chance of a hold and a 0.1 per cent chance of a cut.
Markets are pricing in a hike throughout the second half of next year with the cash rate poised to lift as early as June.
More to come.