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On Tuesday (9 December), the Monetary Policy Board of the Reserve Bank of Australia (RBA) kept the official cash rate steady at 3.60 per cent for December and January, marking the third consecutive month without a change and the first time in a year that rates have remained unchanged for more than two decisions.
The last time the cash rate moved was in August 2025.
The Dec/Jan policy decision was unanimous.
“The board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market. The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.”
The hold was widely expected, with economists pointing to persistent inflation pressures, a balanced labour market, steady GDP growth, and the fact that there has already been a total 75-basis point reduction this year.
Interbank futures for December 2025 were implying only a 3 per cent chance of a cut at the end of last week, with pricing anchored around the current 3.60 per cent cash rate.
Ahead of the decision, Finsure CEO Simon Bednar said there had been “absolute zero chance” of a move, describing an extended hold as “the best news for mortgage customers next year”, but warning that challenges were building.
“There are also headwinds into 2026, and it’s questionable if we’ll see any relief in the near future,” he said and cautioned that brokers would play a critical role in helping clients navigate potentially tougher conditions.
REA Group senior economist Eleanor Creagh described the decision as a “watchful pause”.
“The RBA will need clear evidence that inflation pressures are easing once more before cutting rates again,” she said and noted that interest rates had fallen 0.75 bps this year, boosting borrowing capacity and improving sentiment.
“Combined, these factors drove this year’s reacceleration in home price growth. National home prices rose 0.5 per cent in November and were 8.7 per cent higher than a year ago, the fastest annual growth since mid-2022.”
Creagh added that with rates expected to remain on hold for an extended period, affordability constraints were likely to moderate price growth throughout 2026.
Similarly, Ivan Colhoun, chief economist at credit reporting company CreditorWatch, said the outcome had been widely anticipated and that attention is now shifting to the RBA’s future vision.
“The key question is whether inflation is judged to be persistently running at a rate inconsistent with a return to 2.5 per cent, and whether momentum and spare capacity in the economy warrant an earlier return to tighter policy,” he said.
"If inflation bottoms above the 2.5 per cent target and the economy continues to strengthen, the implications are quite clear: the board will have no option but to move to a more restrictive setting of monetary policy. The first test of that resolve would likely be a q/q trimmed mean for Q4 of 0.9 per cent or above," he continued.
"While that’s not especially welcome news for either mortgage holders or businesses, it’s important that inflation is not allowed to continue to rise at above a 3 per cent rate given the sharp increase in the cost of living in recent years."
Meanwhile, Domain’s chief of research and economics, Dr Nicola Powell, said that a hold to the cash rate was “baked in”, noting that the central bank was “still battling persistent inflation, and with rents, energy and insurance costs remaining high, plus stronger-than-expected household spending, there’s simply no room for a fourth cut this year”.
Powell noted that market expectations were shifting too and stated: “Financial markets see the next move as an increase, rather than a decrease, with a 25 basis-point hike largely priced in before the end of 2026.
“For the housing market, this stability cuts both ways. It gives buyers and sellers more certainty around borrowing costs and may help to take some heat out of the rapid price growth we’ve been seeing, especially at the more affordable end.
“However, it doesn’t solve the deeper affordability issues. Mortgage holders are still managing repayments that are significantly higher than they were before the tightening cycle began in 2022. But as we’ve seen before, it could take just one weak data point to shift expectations all over again.”
Nevertheless, the debate among economists remains split. AMP deputy chief economist Diana Mousina said earlier this week that talk of a rate hike next year was “premature”, citing weakening demand signals, flatlining job ads, and an increasingly cost-conscious consumer.
“Interest rate hikes would risk slowing the economy given these vulnerabilities. In our view, there is a larger risk of a rate cut than a hike in 2026,” she said.
The RBA Monetary Policy Board will next meet on 3 February 2026.
[Related: Is it too early to talk rate hikes? Economists divided]