The likelihood of the RBA raising interest rates has fallen. Have we finally come to our senses? | Greg Jericho

The prospect of the Reserve Bank of Australia raising interest rates has dropped following the latest inflation data. June inflation hit 3.8 percent, a figure that signals a cooldown rather than an economy requiring further cooling measures. While investors previously scrambled to bet on a rate hike, current market expectations have crashed to just 3 percent as reality settles in.

The fixation on potential rate hikes often ignores broader economic signals. For instance, unemployment and underemployment figures show a different story about the actual state of the labor market. When you remove the noise of volatile fuel prices and temporary energy subsidy effects, the case for higher interest rates weakens significantly. Many households still grapple with cost of living pressures on essentials like groceries, yet the official inflation rate suggests a slowing trend.

Looking ahead, the market now shifts its focus toward next year rather than late 2026. The RBA has frequently signaled its intent to manage inflation, yet current figures indicate the economy is not overheating due to excess demand. As we move forward, the focus remains on whether policy moves are grounded in actual data or if there is a lingering bias to act regardless of the underlying economic conditions.