When Commonwealth Bank of Australia released its latest monetary outlook on September 30, 2025, most Australians braced for a interest rate cut before the year’s end. Instead, the bank pushed the predicted reduction back to February 2026, citing hotter‑than‑expected inflation and signs of a nascent economic upswing.
Shift in CBA's Forecast
The revised forecast forecasts a 25‑basis‑point trim to the official cash rate, taking it down to 3.35% at the start of 2026. Reserve Bank of Australia (RBA) kept the rate steady at 3.60% in its September 2025 meeting, a move that surprised many market participants who had been betting on a November cut.
Belinda Allen, the bank’s Head of Australian Economics, explained, “Belinda Allen said inflation came in hotter than expected in August, and the economy is showing signs of a cyclical upswing. This has led us to push back our forecast for the next rate cut. We now expect the RBA to stay on hold for the rest of 2025.”
Inflation and Economic Context
New data released by the Australian Bureau of Statistics showed trimmed‑mean inflation of 0.8% for the September quarter, keeping the annual rate at 2.7%—still above the RBA’s 2‑3% comfort zone. The hot spots? Market services inflation, especially healthcare and education, which have been keeping price pressures aloft.
Economists also noted a modest rise in consumer spending, suggesting a potential cyclical upswing rather than a purely demand‑driven recession. Yet the lingering price‑growth worries mean the central bank is unlikely to swing the policy lever until it sees firmer evidence of durable easing.
How Other Banks View the Timeline
Commonwealth Bank isn’t alone. ANZ Group and National Australia Bank (NAB) have aligned their forecasts with CBA, both pointing to a 25‑bp cut in February 2026. NAB even pushed its estimate to May 2026, still landing the cash rate at 3.35%.
Westpac Banking Corporation, the outlier, still expects three cuts across 2025‑2026, starting with a 25‑bp reduction in November 2025, followed by further trims in February and May 2026 that would bring the rate down to 2.85% by mid‑2026. The divergence underscores how even the big four banks interpret the same data through slightly different lenses.
Market Reaction and Borrower Impact
The news sent a ripple through bond markets. The 10‑year Australian government bond yield slipped from 3.70% to 3.55% after CBA’s announcement, reflecting investors’ recalibrated expectations for lower rates further out.
For borrowers, the delay means tighter budgets for longer. When the RBA cut the rate by 0.25% in February and May 2025, Angus Sullivan, CBA’s Retail Group Executive, said the move gave “some breathing room” to homeowners. That respite now looks set to be postponed by at least a year.
Mortgage lenders have already begun trimming variable rates by 0.25% per annum as of August 22, 2025, but those reductions are earmarked for a market that still expects a near‑future cut. With the forecast now shifted, borrowers may see fewer rate‑adjustment incentives and potentially higher servicing costs.
What Lies Ahead for the RBA
The next RBA board meeting is slated for Tuesday, November 4, 2025. All eyes will be on whether the central bank signals a change in tone or simply re‑affirms its hold stance. The board, composed of nine members, voted unanimously to keep rates unchanged in September, a decision that reflected the institution’s data‑dependent approach.
Analysts expect the November decision to lean on the latest CPI release, projected for early October. If inflation eases below 2.5%, the RBA could reopen the door for a November cut, but most forecasters still see the February 2026 trim as the most probable scenario.
- Current cash rate: 3.60% (as of September 2025).
- CBA’s revised forecast: 25 bps cut to 3.35% in February 2026.
- Inflation outlook: Trimmed‑mean 0.8% Q3, annual 2.7%.
- Other banks’ forecasts: ANZ – Feb 2026; NAB – May 2026; Westpac – three cuts starting Nov 2025.
- Next RBA decision: November 4, 2025.
Broader Implications for the Australian Economy
Delaying the cut could cool down an overheating housing market, but it also risks stalling consumer spending that has just begun to pick up. A prolonged period of higher rates can weigh on business investment, especially for small‑to‑medium enterprises that rely on cheap credit.
Conversely, if the RBA maintains a cautious stance, it may cement its credibility in taming inflation, which could benefit the Australian dollar and import‑priced goods. In short, the timing of the next rate cut isn’t just a number; it’s a signal to every stakeholder, from first‑home buyers to multinational corporations.
Frequently Asked Questions
How does the delayed rate cut affect home loan borrowers?
Borrowers will likely face higher monthly repayments for a longer period, as the cash rate stays at 3.60% throughout 2025. The expected 0.25% variable‑rate relief that came with the early‑year cuts is now postponed, meaning less breathing room for household budgets.
What inflation data prompted CBA to revise its forecast?
The August 2025 CPI report showed a trimmed‑mean inflation rate of 0.8% for the quarter, keeping the annual figure at 2.7%—well above the RBA’s 2‑3% target range. Strong price growth in healthcare and education services also pushed the outlook higher.
Why is Westpac still forecasting cuts in late 2025?
Westpac’s economists argue that the recent uptick in consumer spending and a modest dip in wholesale price indexes could create enough slack for an earlier cut. Their model assumes a quicker easing of underlying inflation pressures than their peers.
What should investors watch for ahead of the November RBA meeting?
Key indicators include the October CPI release, retail sales trends, and the latest wage growth figures. A surprise drop in any of these could tip the board toward a November cut, while firmer data may cement the February 2026 timeline.
How might the delayed cut impact the Australian dollar?
A higher‑for‑longer rate stance generally supports the currency, as it offers better returns on Australian assets. If the RBA holds steady, the dollar could strengthen against the US dollar and the euro, affecting export‑oriented firms.
6 Comments
Lerato Mamaila
October 7 2025
Wow, the CBA’s new outlook really shifts the conversation, doesn’t it? It’s fascinating how the inflation numbers are still dancing above the RBA’s comfort zone, and that has big implications for borrowers across the continent, especially in places like South Africa where we feel the ripple effects of Aussie rates through trade and tourism. I think it’s a good reminder that central banks are interconnected, and a delay here could mean tighter credit for us later. Let’s keep an eye on those upcoming CPI releases – they’ll tell us whether this ‘nascent upswing’ is just a mirage or a real thing.
Cheers!
Jensen Santillan
October 11 2025
One must first acknowledge that the very premise of “delaying” a rate cut is a semantic sleight of hand that masks the deeper structural malaise afflicting the Australian economy; it is not merely a temporal adjustment but a profound signal of policy inertia. The CBA’s revision, couched in the lexicon of “hotter‑than‑expected inflation,” betrays an underlying aversion to confronting the supply‑side constraints that have been festering since the pandemic. Moreover, the juxtaposition of a modest rise in consumer spending against persistent price pressures in healthcare and education suggests a hollow resurgence, one that is likely to evaporate under the weight of sustained fiscal imbalances. To the untrained eye, the deferment to February 2026 may appear benevolent, yet it essentially prolongs a higher‑for‑longer regime that will erode household disposable income. Scholars of monetary theory have long warned that such anticipation of future easing can paradoxically anchor expectations at higher levels, thereby diminishing the efficacy of any eventual cut. The bond market’s reaction- a modest dip in yields- is insufficient to offset the broader macroeconomic drag induced by a stagnant cash rate. In addition, the divergence among the “big four” banks, with Westpac persisting in its more aggressive timeline, underscores the heterogeneity of econometric models currently in vogue. This fragmentation is itself symptomatic of a deeper epistemic crisis within the Australian financial establishment. It is also imperative to note that the RBA’s steadfastness in September may be less about data and more about preserving its credibility after a series of previously optimistic forecasts. Should the RBA capitulate prematurely, it risks alienating its core constituency of pensioners and savers, for whom the real‑interest rate remains a paramount concern. Conversely, a prolonged hold may bolster the Australian dollar, a double‑edged sword that could impair export competitiveness. The delicate balance between inflation containment and growth stimulation is thus rendered even more precarious. In sum, the CBA’s forecast revision is not a benign footnote but a clarion call for a more nuanced discourse on the interplay of monetary policy, fiscal prudence, and structural reforms.
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Mike Laidman
October 15 2025
Looks like they just scared themselves
Fabian Rademacher
October 19 2025
Wake up! The banks are feeding us a narrative that the economy is “steady” while the real agenda is to keep the elite’s wealth locked away. Every time they push the cut to 2026 they’re buying time to line their own pockets, and the public gets the short end of the stick. Don’t be fooled by the fancy graphs – it’s all smoke and mirrors, engineered by a cabal that thrives on higher rates. The RBA’s hold isn’t about inflation; it’s about control. Stay vigilant.
Terrell Mack
October 22 2025
Hey folks, just a heads‑up that the delayed cut could mean a bit more pressure on variable‑rate loans for a while, but it also gives borrowers a chance to lock in fixed rates now if they’re worried. It might be worth shopping around and seeing if you can snag a better deal before the market adjusts again. Keep an eye on your budget and don’t panic – the swing isn’t permanent.
Dawn Waller
October 26 2025
Oh, absolutely!!! The way you *so* elegantly connect Aussie rates to South African tourism is just... *chef’s kiss*!!! It’s like you’ve solved world economics with a single cup of tea!!! But seriously, who needs nuance when we can just sprinkle “relax” all over the place?? Definitely a masterclass in over‑analysis!!!