The Reserve Bank has done as the market predicted, keeping its cash rate at 3.60 percent and hinting at a possible future rates rise if inflation edges up.

“While inflation has fallen substantially since its peak in 2022, it has picked up more recently,” the RBA’s Monetary Policy Division says in a statement.

“The Board’s judgement is that some of the recent increase in underlying inflation was due to temporary factors and there is uncertainty about how much signal to take from the monthly CPI data given it is a new data series.

“Nevertheless, the data do suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring.

“Economic activity continues to recover. Growth in private demand has strengthened, driven by both consumption and investment. Activity and prices in the housing market are also continuing to pick up.

“Financial conditions have eased since the beginning of the year, credit is readily available to both households and businesses and the effects of earlier interest rate reductions are yet to flow through fully to demand, prices and wages.

“On the other hand, money market interest rates and government bond yields have risen more recently.”

The RBA says indicators suggest that labour market conditions remain “a little tight”.

“The unemployment rate has risen gradually over the past year and employment growth has slowed.

“However, measures of labour underutilisation remain at low rates, surveyed measures of capacity utilisation are above their long-run average and business surveys and liaison continue to suggest that a significant share of firms are experiencing difficulty sourcing labour.

“Wages growth, as measured by the Wage Price Index, has eased from its peak but broader measures of wages continue to show strong growth and growth in unit labour costs remains high.”

Australia’s big four banks and commentators are pointing to rates remaining steady with a possible rates rise sometime next year, not a cut.

“This is a cautious statement from the RBA, but the inflation data is still running hot,” said Belinda Allen, Head of Australian Economics at Commonwealth Bank.

“We expect the cash rate to remain on hold in the foreseeable future.”