Reserve Bank of Australia Holds Cash Rate at 3.6% for Final 2025 Meeting

RBA Maintains Cash Rate Amid Economic Crosscurrents

The Reserve Bank of Australia (RBA) announced today, December 9, 2025, its decision to hold the official cash rate steady at 3.6%. This marks the conclusion of the RBA's monetary policy meetings for the year, with the decision aligning with widespread expectations among market analysts and economists. The RBA Board convened on December 8-9, 2025, to assess the latest economic data before making its final determination.

Persistent Inflationary Pressures Noted

A key factor influencing the RBA's decision is the ongoing challenge of inflation. Australia's annual inflation rate rose to 3.8% in October 2025, an increase from 3.6% in September 2025, and remains above the central bank's target band of 2-3%. The RBA's preferred measure, trimmed mean inflation, also stood at 3.3% in October 2025, exceeding the target. In its post-meeting statement, the RBA Board acknowledged that 'inflation risks have tilted to the upside' and that underlying inflation had 'picked up more recently.' However, the Board also suggested that some of this increase might be due to temporary factors, indicating a cautious approach to assessing the persistence of these inflationary pressures.

Mixed Economic Signals

The decision to hold the cash rate comes against a backdrop of mixed economic signals. Australia's economy has shown signs of recovery, with Gross Domestic Product (GDP) growing by 0.4% in Q3 2025 and an annual growth rate of 2.1%, representing a significant improvement from the previous year. This growth was supported by a 0.5% rise in household consumption during the quarter and a 2.5% increase over the year, bolstered by real disposable income growth. Business investment also saw a lift of 3.2%, with dwelling investment showing strong growth.

Conversely, the labour market has shown signs of cooling. The unemployment rate increased to 4.3% in October 2025, reaching its highest level since the post-pandemic period. This indicates that earlier monetary tightening measures are now impacting real economic activity.

Outlook and Future Monetary Policy

While the RBA has opted for a hold, the outlook suggests continued vigilance. The central bank indicated that it would 'take a little longer to assess the persistence of inflationary pressures' and would 'remain cautious,' updating its view as new data emerges. Despite the current hold, there is growing speculation among economists and market participants about potential interest rate hikes in 2026, particularly if inflationary pressures prove more persistent than anticipated. The RBA's decision provides a brief period of stability for mortgage holders, but the prospect of further tightening remains a key consideration for the coming year.