RBA makes final cash rate call of 2025

The Reserve Bank has announced its cash rate decision for the December monetary policy meeting.

The Reserve Bank of Australia (RBA) has decided to hold the cash rate at 3.6 per cent during its final monetary policy meeting for the year, a move that was widely expected by market analysts.

Today’s decision marks the third consecutive cash rate hold for 2025, with a total of five cash rate holds during the year and 0.25 basis point cuts enacted in February, May and August.

The latter half of 2025 was marred by an unfavourable run of economic data for the central bank, particularly in recent CPI prints indicating persistent inflation pressures.

Since the November meeting, economic data has strengthened further, with unemployment falling to 4.3 per cent, inflation surprising on the upside again, GDP matching expectations with solid underlying momentum, and retail spending beating forecasts.

Given this backdrop, the board was likely unable to consider further easing at its December meeting.

The unexpectedly high monthly inflation result also means the board will likely need to discuss a scenario involving rate hikes, potentially as early as February if the Q4 CPI prints above 0.8 per cent quarter-on-quarter.

Following the release of the Australian Bureau of Statistics’ (ABS) first full monthly reading of the CPI in October, economists and market observers almost unanimously agreed that this data would give the RBA pause during today’s meeting.

The decision to hold will see the cash rate remain at 3.6 per cent until the board’s next meeting in February 2026.

Reacting to the decision, CreditorWatch’s chief economist Ivan Colhoun said: “The markets expected to see the Board introduce a scenario discussing the conditions under which an earlier return to tighter monetary policy might be required, given recent higher than expected inflation prints.”

“Key here, will be the extent to which inflation is judged to be persistently running at a rate inconsistent with a return to 2.5 per cent inflation, along with assessments of momentum and spare capacity in the economy.

“A Q4 trimmed mean inflation print above 0.8 per cent q/q would significantly increase the risk of an interest rate rise early next year.”

Adrian Suljanovic

December 5 2025

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