Reserve Bank of Australia signals faster labour market easing as rate hike odds recede

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Darina Pashchenko

19.10.2026

Reserve Bank of Australia signals faster labour market easing as rate hike odds recede — RBA sees faster job easing

Australia's labour market is showing signs of easing more quickly than policymakers had expected, complicating the interest-rate outlook for the Reserve Bank of Australia. The shift follows September data showing unemployment at a five-year high of 4.7%, though the central bank is cautioning against drawing firm conclusions from a single monthly reading.

Highlights

Reserve Bank of Australia officials say trimmed rate hike odds are justified after labour market data showed faster-than-expected easing in employment tightness.
RBA's Christopher Kent emphasized that upcoming quarterly inflation data will clarify whether labour market softening stems from weaker demand or rising wage costs.
Market pricing reflects a 30% chance of a rate hike at the November 2–3 meeting and about 50% by December, as inflation risks persist with underlying inflation at 3.6%.

Labour data reshapes rate expectations

As reported by Reuters, Christopher Kent, assistant governor of the Reserve Bank of Australia, said on Monday that financial markets were justified in trimming the probability of another interest-rate increase after last week's labour market data. He said policymakers remained cautious about relying too heavily on monthly figures, even as some indicators suggest the market has become less tight faster than the central bank had forecast.

Kent, who heads the RBA's financial markets unit, said a key issue for policymakers is whether labour market easing is being driven by weaker demand or by rapidly rising labour costs. He added that quarterly inflation data due next week should help answer that question.

Inflation risks keep policy outlook open

The resilience of the labour market is one reason the RBA raises interest rates four times this year, taking them to 4.6% as it seeks to contain inflation. Even so, the underlying inflation measure remains stuck at 3.6% for three straight months, and Kent said risks are still tilted to the upside.

Market pricing now implies a 30% chance that the RBA lifts rates at its next policy meeting on November 2 and 3, while the probability of a move by December is about 50%. That leaves investors balancing signs of softer employment conditions against persistent inflation pressures in the Australian economy.

In our earlier article on Bank Negara Malaysia’s policy guidance shift, we explained how dropping the description of its stance as “appropriate” was read by markets as opening room for a potential rate hike if inflation pressures intensify. We also noted that inflation was still expected to remain within the official forecast range, but risks from elevated energy prices and Middle East tensions were keeping traders focused on the outlook for rates and market volatility.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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