Inflation, Private Credit, and Key U.S. Developments

On Melbourne Cup Day, while everyone else was busy placing bets, the market sat this one out, the result was already clear. Call it a win for the RBA, for the market, or maybe a draw where everyone got what they expected. Governor Bullock stepped up and delivered exactly what was priced in: no rate cut.

Last month’s unemployment data briefly spooked the market, jumping from 4.2% to 4.5% as more people entered the labour force. That was enough for market punters to reverse their bets, suddenly pricing in a 70% chance of a cut. But the RBA was waiting for the quarterly inflation print to steer the horse, and inflation came in hotter than expected.

The CPI rose 1.3% in 3Q, stronger than both the forecast (0.8%) and consensus (1.1%). Core inflation also surprised, with the trimmed-mean CPI up 1.0% quarter on quarter, lifting the annual rate to 3.0% from 2.7%, an upside shock to the RBA’s August projections. For September, the monthly CPI indicator rose 3.5% year on year (consensus: 3.1%), up 0.5% month on month.

The pickup in core inflation killed any chance of a November rate cut. What was a 70% probability heading into the month evaporated by Cup Day. The RBA’s trimmed mean, its preferred gauge, climbed back to the top of the 2–3% target band, forcing a more hawkish tone. Most of the jump looks temporary, tied to the expiry of cost-of-living relief and a 9% quarterly surge in electricity prices, now up 23.6% year-on-year. Property rates (+6.3%) and the usual seasonal lift in travel and accommodation costs also added to the headline number.

Governor Bullock was blunt, inflation remains the priority, and rate cuts weren’t even on the table. For now, neither the market nor the RBA is entertaining a cut. But with inflation still running ahead, this could be one race the central bank can’t afford to lose.A week before Cup Day, the Fed met with 25bps already priced in and delivered exactly that. The Federal Reserve remains focused on the labour market, with jobs and openings central to policy. Inflation is still a concern, but the Fed is taking a measured approach, keeping rates in a neutral range while monitoring household finances and consumer spending.

A week before Cup Day, the Fed met with 25bps already priced in and delivered exactly that. The Federal Reserve remains focused on the labour market, with jobs and openings central to policy. Inflation is still a concern, but the Fed is taking a measured approach, keeping rates in a neutral range while monitoring household finances and consumer spending.

At the 29 October FOMC meeting, the Fed cut the federal funds rate by 0.25% to 3.75–4.0%. There were two dissenters: Stephen Miran for a 0.5% cut, and Kansas City’s Jeffrey Schmid for no change. Chair Powell noted that opinions within the FOMC are increasingly split, and a December rate cut is “not a foregone conclusion”. Recent cuts are seen as preventative against downside risks to employment, but future moves will remain data dependent. Overall, the Fed appears composed, balancing support for jobs with ongoing inflation pressures, and staying guided by broad economic indicators rather than reacting to short-term market signals.

Taken together, the RBA and the Fed are navigating a delicate balancing act, but with very different priorities. In Australia, inflation dominates the agenda, leaving little room for rate cuts despite softening unemployment. In the US, the focus remains squarely on jobs, with the Fed taking a cautious, data-driven approach to sustain growth while keeping inflation in check. For markets, this means central banks are not signalling dramatic shifts anytime soon, policy will continue to be patient, measured, and closely tied to incoming economic data.

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