Meeting minutes reveal the main reason for the Reserve Bank of Australia's pause in interest rate cuts: concerns about a resurgence in inflation.

The Reserve Bank of Australia (RBA) stated that the risk of inflation accelerating exists under the condition of a labor market that is still "slightly tight," which was a key reason for its decision last month to keep interest rates unchanged. The RBA reiterated that future policy decisions will continue to be cautious and guided by data. The meeting minutes showed that the RBA decided to maintain the cash rate at 3.6% during the meeting on September 29-30. Prior to this decision, two consecutive months of Consumer Price Index (CPI) data had shown increases, indicating that inflation may be higher than the recent forecasts by central bank staff. The RBA pointed out that while monthly CPI data "can be localized and volatile," results for housing and market services prices suggest that the risk of rising price pressures is increasing. The RBA wrote in the meeting minutes, "If inflation is higher than expected and the labor market remains generally stable, this situation, if it persists, may mean that the staff's assumptions about the balance of total demand and potential supply are incorrect." The central bank also noted, "The experiences of some other countries with persistent high service sector inflation may have relevance for Australia." The meeting minutes highlighted the cautious stance taken by Australian policymakers during the period of monetary easing. So far, they have successfully guided the economy to achieve a "soft landing" - consumer prices have returned to the target range of 2% to 3% set by the central bank, while the unemployment rate remains slightly above the historical low of 4%. In terms of the global situation, facing uncertainties in U.S. government policy direction and potential risks of significant tariffs imposed on China (Australia's largest trading partner), Australian policymakers believe that the "least regrettable" path is to maintain a gradual approach. The meeting minutes stated, "Committee members believe that monetary policy may still be slightly restrictive, but also acknowledge that the actual degree of tightening is difficult to determine." This cautious stance contrasts with their New Zealand counterparts. The Reserve Bank of New Zealand cut interest rates by 50 basis points last week, further expanding its aggressive easing measures to address the local economic weakness. In the U.S., the Federal Reserve also cut interest rates last month, and Philadelphia Fed President Anna Paulson has indicated her inclination to cut rates two more times this year, each by 25 basis points. On the other hand, the rebound in business confidence also indicates signs of an economic upturn. A survey released on Tuesday by National Australia Bank (NAB) showed an increase in business confidence in September. Sally Auld, Chief Economist at NAB, stated, "The September survey continued to show positive results on key indicators. Business confidence and conditions appear to be steadily consolidating above long-term average levels following an improvement in mid-2025." Australia will release new labor market data on Thursday this week. Economists expect the unemployment rate to slightly increase from 4.2% to 4.3%. The RBA will hold its next meeting on November 3-4, and strong monthly inflation data has prompted some economists to give up their predictions of further rate cuts this year. The RBA has already cut borrowing costs three times since February. In addition to employment data, the RBA will also receive quarterly CPI data, the most comprehensive indicator of price trends in the economy, as well as updated economic forecasts from RBA staff. Third-quarter inflation data will be released on October 29. The RBA stated in the meeting minutes, "The flow of information since the last meeting, August forecasts, and judgments on the degree of policy constraints collectively indicate that there is currently no need to immediately lower the cash rate target." "Looking ahead, committee members noted that decisions should continue to be cautious and data-driven."