RBA: Watchful of risks in both directions - Standard Chartered

The RBA kept the cash rate unchanged at 3.60% at its 4 November meeting. Governor Bullock was unenthusiastic about further policy easing amid prevailing economic uncertainty. An abrupt deterioration in the labour market necessitating more monetary easing remains the key risk, Standard Chartered's FX and Macro Strategist Nicholas Chia reports.

In a good place

"The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.60% in a unanimous decision, in line with our and market expectations. The policy statement was a touch more hawkish, with the RBA indicating that "there is a little more inflationary pressure in the economy than previously thought". Despite the recent uptick in the unemployment rate, the central bank still thinks the labour market is a little tight, evidenced by elevated vacancies and liaison surveys pointing to businesses struggling to find workers. This year's growth forecast was revised higher, while 2026's was slightly lowered to reflect external headwinds to growth from tariffs."

"At the press conference, Governor Bullock was unenthusiastic about further rate reductions amid prevailing economic uncertainty. She did not rule out more rate cuts in 2026 but also kept open the option to raise rates if the need arises. Bullock thinks there is more stability in the labour market than what the uptick in the unemployment rate implies, although she remains alert to any downside surprise in employment. The 75bps of rate cuts to date has yet to fully work its way through the economy, and Bullock cautioned that the central bank will be watchful of any risks of aggregate demand outpacing supply."

"Today's RBA meeting gives us more conviction in an extended pause by the central bank. An abrupt deterioration in the labour market, which would put downward pressure on CPI inflation and enable the RBA to ease policy more aggressively, is a key risk. On the flip side, it may well be that global central bank easing, easing financial conditions, increased public spending and more certainty on tariffs keep the global economy on an even keel, with positive spillovers to the Australian economy. That said, we doubt the RBA will be contemplating rate hikes in the near term."