Kent’s remarks pull in two directions, which may limit any lasting move in the Australian dollar. Endorsing the post-jobs repricing suggests the RBA is comfortable with markets scaling back near-term hike bets, a mild negative for the currency and supportive for short-end bonds. But the neutral rate argument is a hawkish undercurrent, since it implies the 4.60% cash rate may be doing less work than assumed. That makes the 28 October inflation data the pivotal event: a hot print would revive November hike pricing quickly, while a soft one would likely cement a pause. Rate-sensitive sectors, especially property and banks, will be tracking that shift closely.
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Earlier:
Euro slides against Australian dollar as three European headwinds hit early trade
—Kent is happy for markets to pare November hike bets after a weak jobs report, but his warning that neutral rates are rising leaves the RBA plenty of room to tighten again if inflation runs hot.
Summary:
RBA Assistant Governor (Financial Markets) Christopher Kent said there is reasonable evidence neutral rates are rising in Australia and abroad
He is confident policy is somewhat restrictive but questioned whether it is restrictive enough
Household demand is softening, business credit remains strong, and housing tax changes have helped monetary policy
Kent is cautious on monthly jobs data but said the labour market has become less tight
He said the market move after last week’s weak jobs report, a lower Australian dollar, lower short-term rates and reduced near-term hike odds, made sense
The cash rate is 4.60% after four hikes this year; Q3 CPI is due 28 October, ahead of the 2 to 3 November RBA meeting
Reserve Bank of Australia Assistant Governor Christopher Kent said there is reasonable evidence that neutral interest rates are rising, both in Australia and overseas, raising the question of whether monetary policy is as tight as it appears, even after four rate increases this year.
Speaking at a fireside chat at the Commonwealth Bank’s Global Markets Conference in Sydney, Kent, who oversees financial markets at the central bank, said he was confident policy is somewhat restrictive but questioned whether it is restrictive enough.
The neutral rate is the level of interest rates that neither stimulates nor restrains the economy. If it has drifted higher, a cash rate that looks tight on paper may be exerting less pressure on demand and inflation than policymakers had assumed, which would strengthen the case for keeping rates higher for longer or tightening further.
Kent’s remarks come as the RBA weighs its next move. The board lifted the cash rate by 25 basis points to 4.60% on 29 September, its fourth increase of 2026, citing inflation that remains too high, energy prices pushed up by the broadening conflict in the Middle East, and lingering capacity pressures. It said further increases were possible if needed.
On the economy, Kent said household demand is softening, while business credit growth remains strong. He described recent tax changes affecting housing as helpful for monetary policy, a sign the bank sees fiscal settings working with it rather than against it on housing demand.
He was more cautious on the labour market. Kent said he was wary of reading too much into monthly employment figures, but acknowledged conditions have become less tight. Data last week showed employment fell by about 39,000 in September, against expectations of a gain of around 20,000, with the unemployment rate rising to 4.7%, the highest in around five years.
That report sent the Australian dollar and short-term interest rates lower as traders pared bets on a near-term hike. Kent said that market reaction made sense, a comment likely to be read as the bank seeing no reason to push back against the repricing.
Even so, the debate is far from settled. ANZ kept its call for a further 25 basis point increase in November after the jobs data, arguing that upward revisions to the bank’s inflation forecasts make a hike more likely than not.
The next key test is quarterly inflation data on 28 October, ahead of the RBA’s 2 to 3 November meeting. Kent’s comments on a rising neutral rate suggest that, if inflation surprises to the upside, the bank still sees room to tighten.
This article was written by Eamonn Sheridan at investinglive.com.
