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State Street: RBA holds rates at 3.6% as hawkish tone emerges
State Street has said the Reserve Bank of Australia’s (RBA) decision to hold the cash rate at 3.6 per cent reflects a more hawkish policy bias, signalling that the central bank is likely to keep rates on hold for longer amid persistent inflation pressures.
Dwyfor Evans, Head of APAC Macro Strategy at State Street Markets, said the RBA’s updated statement now projects only one rate cut in 2026, compared with two previously flagged in August, aligning the central bank’s outlook more closely with overnight indexed swap (OIS) pricing.
“The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.6%, as widely expected,” Mr Evans said.
“The material change in the language is a more hawkish bias from one further cut expected in 2026 from the two highlighted in the August statement. This brings the RBA view on rates broadly in line with OIS pricing.”
Mr Evans said the RBA’s commentary continued to highlight a tight labour market, which remains a key factor driving both housing activity and discretionary spending. However, he noted that the central bank also acknowledged a moderation in wage growth.
“The RBA continued to focus on a tight labour market, notable given its impact on housing and discretionary spending, but it did explicitly note that wage growth has eased from its peak,” he said.
“Inflation has edged higher, while the State Street PriceStats series for Australia continues to allude to above-target price pressures. All in all, a hawkish bias that will continue to pressure AUD bonds at the margins but maintain a constructive view on the Australian dollar.”
Krishna Bhimavarapu, APAC Economist at State Street Investment Management, said the RBA’s stance was consistent with the recent Q3 CPI surprise, but cautioned that labour market risks could still be underestimated.
“We saw today’s hawkish turn coming after the Q3 CPI surprise last week,” Mr Bhimavarapu said.
“However, we want to emphasize that the outsized impact of electricity rebates and annual reviews. Still, while the lift in inflation forecasts is understandable in that context, we think risks in the labor market are still underappreciated.”
Mr Bhimavarapu said the RBA may keep the cash rate steady for an extended period unless the employment outlook weakens faster than expected.
“The unemployment rate might be anchored at 4.5% for some time, but perhaps less likely till 2027,” he said.
All the developments point to the RBA holding cash rate at 3.60% for the foreseeable future, unless the risks in the labor market materialize sooner than even we anticipate.”
State Street is one of the world’s leading providers of financial services to institutional investors, with US$46.8 trillion in assets under custody and administration and US$4.7 trillion in assets under management.
State Street: RBA holds rates at 3.6% as hawkish tone emerges
State Street has said the Reserve Bank of Australia’s (RBA) decision to hold the cash rate at 3.6 per cent reflects a more hawkish policy bias, signalling that the central bank is likely to keep rates on hold for longer amid persistent inflation pressures.
Dwyfor Evans, Head of APAC Macro Strategy at State Street Markets, said the RBA’s updated statement now projects only one rate cut in 2026, compared with two previously flagged in August, aligning the central bank’s outlook more closely with overnight indexed swap (OIS) pricing.
“The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.6%, as widely expected,” Mr Evans said.
“The material change in the language is a more hawkish bias from one further cut expected in 2026 from the two highlighted in the August statement. This brings the RBA view on rates broadly in line with OIS pricing.”
Mr Evans said the RBA’s commentary continued to highlight a tight labour market, which remains a key factor driving both housing activity and discretionary spending. However, he noted that the central bank also acknowledged a moderation in wage growth.
“The RBA continued to focus on a tight labour market, notable given its impact on housing and discretionary spending, but it did explicitly note that wage growth has eased from its peak,” he said.
“Inflation has edged higher, while the State Street PriceStats series for Australia continues to allude to above-target price pressures. All in all, a hawkish bias that will continue to pressure AUD bonds at the margins but maintain a constructive view on the Australian dollar.”
Krishna Bhimavarapu, APAC Economist at State Street Investment Management, said the RBA’s stance was consistent with the recent Q3 CPI surprise, but cautioned that labour market risks could still be underestimated.
“We saw today’s hawkish turn coming after the Q3 CPI surprise last week,” Mr Bhimavarapu said.
“However, we want to emphasize that the outsized impact of electricity rebates and annual reviews. Still, while the lift in inflation forecasts is understandable in that context, we think risks in the labor market are still underappreciated.”
Mr Bhimavarapu said the RBA may keep the cash rate steady for an extended period unless the employment outlook weakens faster than expected.
“The unemployment rate might be anchored at 4.5% for some time, but perhaps less likely till 2027,” he said.
All the developments point to the RBA holding cash rate at 3.60% for the foreseeable future, unless the risks in the labor market materialize sooner than even we anticipate.”
State Street is one of the world’s leading providers of financial services to institutional investors, with US$46.8 trillion in assets under custody and administration and US$4.7 trillion in assets under management.
State Street has said the Reserve Bank of Australia’s (RBA) decision to hold the cash rate at 3.6 per cent reflects a more hawkish policy bias, signalling that the central bank is likely to keep rates on hold for longer amid persistent inflation pressures.
Dwyfor Evans, Head of APAC Macro Strategy at State Street Markets, said the RBA’s updated statement now projects only one rate cut in 2026, compared with two previously flagged in August, aligning the central bank’s outlook more closely with overnight indexed swap (OIS) pricing.
“The Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.6%, as widely expected,” Mr Evans said.
“The material change in the language is a more hawkish bias from one further cut expected in 2026 from the two highlighted in the August statement. This brings the RBA view on rates broadly in line with OIS pricing.”
Mr Evans said the RBA’s commentary continued to highlight a tight labour market, which remains a key factor driving both housing activity and discretionary spending. However, he noted that the central bank also acknowledged a moderation in wage growth.
“The RBA continued to focus on a tight labour market, notable given its impact on housing and discretionary spending, but it did explicitly note that wage growth has eased from its peak,” he said.
“Inflation has edged higher, while the State Street PriceStats series for Australia continues to allude to above-target price pressures. All in all, a hawkish bias that will continue to pressure AUD bonds at the margins but maintain a constructive view on the Australian dollar.”
Krishna Bhimavarapu, APAC Economist at State Street Investment Management, said the RBA’s stance was consistent with the recent Q3 CPI surprise, but cautioned that labour market risks could still be underestimated.
“We saw today’s hawkish turn coming after the Q3 CPI surprise last week,” Mr Bhimavarapu said.
“However, we want to emphasize that the outsized impact of electricity rebates and annual reviews. Still, while the lift in inflation forecasts is understandable in that context, we think risks in the labor market are still underappreciated.”
Mr Bhimavarapu said the RBA may keep the cash rate steady for an extended period unless the employment outlook weakens faster than expected.
“The unemployment rate might be anchored at 4.5% for some time, but perhaps less likely till 2027,” he said.
All the developments point to the RBA holding cash rate at 3.60% for the foreseeable future, unless the risks in the labor market materialize sooner than even we anticipate.”
State Street is one of the world’s leading providers of financial services to institutional investors, with US$46.8 trillion in assets under custody and administration and US$4.7 trillion in assets under management.
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