Commerzbank Sees Australia's Central Bank on Hold This Week

09:54 AM EDT, 09/29/2025 (MT Newswires) -- The Reserve Bank of Australia is scheduled to release its policy statement at 12:30 a.m. ET on Tuesday, bringing this nerve-wracking month of nine G10 central bank meetings to a close --the New Zealand central bank isn't due to meet until next week, said Commerzbank.

However, anything other than an unchanged interest rate would be a big surprise, as the markets are pricing in a rate cut with only a 3% probability, and none of the economists surveyed by Bloomberg expect a change, wrote the bank in a note to clients.

At first glance, this may seem surprising, stated Commerzbank. Since the last meeting, labor market figures haven't been particularly impressive. In July, the Australian labor market recorded an increase of 24,500 jobs, roughly as expected, but this was far from the exceptional figures seen the previous year.

In August, however, jobs actually declined. It is only thanks to an upward outlier in April that the six-month moving trend is still holding up reasonably well, pointed out the bank. In addition, quarterly job vacancies also declined in the period up to August.

In short, the labor market no longer appears to be as robust as it was last year.

There is a simple reason why the RBA isn't lowering interest rates despite this: inflation risks haven't yet been eliminated. The monthly inflation indicator exceeded expectations in both July and August, reaching 3.0% year-on-year -- up from 1.9% before the last meeting -- and approaching the upper limit of the 2%-3% target range. While this is only one indicator -- the monthly inflation figures will not be fully implemented until publication at the end of November for October -- it's likely to increase decision-makers' concerns about overly rapid monetary easing, added Commerzbank.

As a consequence, the cooling of the labor market is unlikely to be sufficient to justify faster interest rate cuts. Before its November meeting, the RBA will have new quarterly inflation figures and will be better placed to assess the strength of inflationary pressure. Until then, however, policymakers are likely to be cautious, which is why this week's meeting isn't expected to have much impact on the Australian dollar (AUD), according to the bank.

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