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The Monetary Policy Board of the Reserve Bank of Australia (RBA) will hand down its December rate decision this afternoon (9 December), with the market widely expected that the cash rate will be kept at its current rate of 3.60 per cent.
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.
Economists have pointed to sticky service sector inflation, a labour market that is neither weak nor overheated, and moderate economic growth as key reasons a further cut is unlikely in the near term.
But the bigger question is what happens next – and here, expectations are starting to diverge.
While consensus is that the cash rate will be kept level for the third consecutive month, more chatter is starting about the next rate movement being a rate increase, rather than a cut.
Among those expecting a hike is Finsure CEO Simon Bednar, who believes borrowers should be preparing for a tougher environment.
Ahead of today’s RBA board meeting (9 December), Bednar stressed there was “absolute zero chance of a move by the RBA at this month’s meeting”, noting the central bank is widely expected to leave the cash rate unchanged at 3.60 per cent for a third straight month.
He added that an extended hold would be “the best news for mortgage customers next year”, but warned that challenges are building: “There are also headwinds into 2026”, and said it was “questionable if we’ll see any relief in the near future.”
Bednar said his concern is that the easing cycle may have already peaked. “I have concerns there could be possibly two hikes in the New Year, which is unfortunate,” he said and emphasised the increasing importance of brokers helping clients plan ahead for “tough times”.
Indeed, the ASX 30 Day Interbank Cash Rate Futures Implied Yield Curve shows that the market expects rates to rise next year. Looking forward to December 2026, the implied yield is for rates to be around 3.86 per cent, for example.
But some economists said the conversation is jumping the gun.
AMP deputy chief economist Diana Mousina is one of the strongest voices pushing back on speculation that the next move from the RBA could be up. In fresh analysis released this week, she warned that discussion of tightening in 2026 is “premature”, suggesting the balance of risks still leans toward a cut rather than a hike.
Writing in an Econosights update on Monday (8 December), Mousina said that inflation a little above 3 per cent “is not a problem” for the broader economy and flagged weakening demand signals, with job ads “flat-lining, rather than accelerating”, slower public sector spending ahead, and a consumer increasingly “cost-conscious and sensitive to sales periods”.
She said: “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.”
Yet while Mousina sees little justification for pre-emptive tightening, three of the major banks have now revised their interest rate expectations, suggesting the current 3.60 per cent may prove to be the terminal rate. ANZ was the latest to retreat from calling another cut, moving its forecast last week.
According to ANZ’s head of Australian economics, Adam Boyton, the bank “no longer sees one final rate cut from the RBA in the first half of 2026, given recent inflation pressure” and believes the case for easing is “less clear” than before.
National Australia Bank’s chief economist, Sally Auld, echoed the concern that momentum may force the RBA’s hand if conditions strengthen further. Speaking on the NAB Morning Call podcast on Friday (5 December), Auld noted the bank will be watching closely for signs of acceleration into 2026.
She added that one scenario could see the RBA tightening as soon as February 2026, if January’s inflation read for November lands near 1 per cent.
Similarly, CBA’s head of Australian economics, Belinda Allen, said on Monday (8 December) that she expects the RBA to be on hold at 3.60 per cent “for an extended period”.
She said: “The labour market is broadly in balance. The RBA is closely watching dynamics in pricing and labour market activity to determine the future path of the cash rate. We expect the RBA to remain on hold from here, but the data flow on inflation and the labour market will be critical to watch, and recent data highlights the upside risks to both.”
Nevertheless, Allen said that if wages continue to strengthen and inflation remains high, “the risk of interest rate hikes in 2026 will rise”.
Are markets getting ahead of themselves?
Despite the recent swing to factor in potential rate hikes, AMP’s Mousina urged caution, highlighting the difficulty of interpreting monthly CPI data and the normality of temporary overshoots.
She also said inflation is more likely to drift downward through 2026 as wage growth cools, migration eases, public sector outlays slow, and global price pressures moderate.
Her central view remains that a lift in the cash rate is not the most likely path.
For brokers, however, the message is clear: uncertainty is back, borrower budgets remain tight, and clients will need guidance as the debate shifts from when rates fall – to whether they fall at all.
The RBA will deliver its final decision for 2025 at 2:30pm AEDT today (9 December), with the next meeting scheduled for 3 February 2026.
[Related: RBA minutes point to cautious path on rates]