CANBERRA, AAP – Reserve Bank of Australia governor Philip Lowe is adamant that the cash rate won’t rise any time soon, defying financial market expectations that an increase could come as early next year.

Markets had started pricing in the risk of an early rate rise after last week’s inflation data for the September quarter proved stronger than expected.

It saw annual underlying inflation hit its strongest level in six years at 2.1 per cent.

But Dr Lowe told a webinar following Tuesday’s monthly board meeting, where the cash rate was kept at a record low 0.1 per cent, this was a “complete overreaction” by markets to the inflation figures.

“The latest data and forecasts do not warrant an increase in the cash rate in 2022,” Dr Lowe said.

“I recognise that some other central banks are raising rates, but our situation is different. The board will not increase the cash rate until inflation is sustainably in the (two to three per cent) target range.”

The bank’s latest forecast is that underlying inflation will be no higher than 2.5 per cent at the end of 2023.

Meanwhile, the Australian Bureau of Statistics will release building approvals figures for September on Wednesday.

Economists expect home building approvals declined in September after an unexpected 6.8 per cent surge in August.

Their forecasts point to a two per cent fall in September due to the unwinding impact from federal government HomeBuilder grants scheme and disruptions from COVID-19 lockdowns.

The ABS will also release its living cost indexes for the September quarter, which dissects how last week’s inflation figures impacted certain groups in the community, such a employees, aged pensioners and self-funded retirees.