What’s the learned view on what we should expect next month in terms of a rate cut?

While economists, including yours truly, got the RBA’s September rate call right yesterday, the November interest rate decision will be like picking the winner of the four-legged lottery we call the Melbourne Cup. And yes, the central bank’s rate-setting board meets on Cup Day, namely the first Tuesday in November, that being the 4^th of that month.

So, what’s the learned view on what we should expect next month?

The starting point is that the RBA left the cash rate of interest at 3.6% and inflation hitting 3% for the year in August on a monthly basis. This was the highest level in more than a year.

The board’s statement was clear about its inflation concerns:

“Recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected at the time of the. August Statement on Monetary Policy.”

It also noted that its economic guessing was telling the board members that the economy was growing better than earlier in the year when quarterly growth was 0.2% in the March quarter, meaning the annual number was a weak 1.2%.

That’s why we’ve seen three rate cuts totalling 0.75% this year, so far.

The RBA has cut rates by 75 basis points so far this year, after holding them steady at 4.35% since November 2023 in its bid to rein in inflation.

This led the board to conclude:

“Stronger-than-expected data on growth and inflation may indicate that households have become more comfortable consuming ... [but] growth in consumption might not persist, particularly if households become more concerned about overseas developments.”

Central bank boss, Michele Bullock, didn’t rule in or out a cut in November and pointed to the potential global issues out there. And she was happy that monetary policy had firepower to help the economy if rate cuts were needed.

CBA economist Belinda Allen looked at the board’s statement and concluded that:

“the decision to hold interest rates steady was “unanimous” across the nine-member rate-setting Board, which appears willing to wait for confirmation that inflation is on track to sustainably hit the midpoint of its 2-3% target band.”

The next time we see our latest quarterly CPI reading on inflation is Wednesday October 29, which is six days before the Cup Day rate decision.

In the previous week, the RBA will get to see the latest economic growth number on October 23, and then the September unemployment figure the next day.

That’s a virtual arsenal of economic statistics that should be sufficient for the RBA to make a firm decision on whether a cut’s needed. And that’s the crucial point — the central bank will cut if the economy needs it. Lower inflation and economic growth would force its hand to cut. Also, rising unemployment would help those praying on another cut ASAP.

Interesting, the US business website CNBC looked at our rate cut prospects and quoted a note from Harry Murphy Cruise, Oxford Economics’ Head of Economic Research and Global Trade, who said the RBA had “effectively won its fight against inflation. He forecasts that Australia’s trimmed mean inflation — a gauge of core or underlying inflation — to ease to 2.6% in the third quarter of 2025 and added that this should pave the way for a rate cut in November. An additional cut in the first quarter of 2026 can be expected, as underlying inflation by that time will have approached the midpoint of RBA’s target band, but the unemployment rate is expected to rise, warranting additional monetary support, Cruise said”.

But unlike the last survey of economists and commentators by Finder.com.au, when 32 out of 32 respondents to the survey said “no cut”, the Cup Day decision will split economic experts.

Belinda Allen announced that her colleagues had pushed the next and final rate cut out from November to February!

However, the AMP chief economist and his team see it differently. “We see September quarter trimmed mean inflation being close enough to RBA forecasts at 2.6-2.7% year-on-year to allow another rate cut in November but concede it’s a very close call.

“Beyond that, we are forecasting one more rate cut in February taking the cash rate to a bottom of 3.1%. The risks are that they are delayed, or we get even less cuts.”

By the way, Oliver points out that the money market players who live and breathe interest rates are allowing for another one and a half more 0.25% cuts with around a 54% probability of a cut by year end.

So, in horse-racing betting terms, a cut is no certainty and remains a 50:50 chance.