RBA opts for a Santa-pause
The RBA’s official cash rate ends 2025 at 3.60% with the Central Bank delivering a third consecutive rate pause at today’s board meeting.
At its final get-together of 2025, the RBA took a wait-and-see approach as the board closely monitors the inflation rate heading into the festive season.
‘While inflation has fallen substantially since its peak in 2022, it has picked up more recently,’ noted the RBA today.
‘The Board’s judgement is that some of the recent increase in underlying inflation was due to temporary factors and there is uncertainty about how much signal to take from the monthly CPI data given it is a new data series,’ the Central Bank added.
As you’d recall, there was optimism that the official cash rate would be at 3.10% by now – but that was before the jump in September quarter inflation figures.
Not much has changed since then – the October headline inflation was up from 3.60% to 3.80%. Even October’s trimmed mean measure of core inflation – the RBA’s preferred metric – rose from 3.20% to 3.30% from the prior month.
Amid rate fear headlines, respected economist Warren Hogan even argued for a hike today.
So, after a year which promised so much for borrowers – three rate cuts by August – inflation has once again blunted hopes for sustained lowering of borrowers’ costs.
The RBA’s target range for inflation is 2–3%, hence the ongoing caution at Martin Place. Interestingly, 18 lenders have increased at least one of their fixed home loan rates since 1 November.
Perhaps they are sensing the direction of rates?
After all, at last week’s Senate Economics Legislation Committee, Governor Bullock floated the possibility that increased fiscal deficits could lead to higher interest rates for Australians.
Meanwhile, ANZ, CBA and NAB all believe that the RBA will remain on an ‘extended pause’ in 2026. However, Westpac retains an optimistic view. According to its weekly economic note, the official cash rate will drop to 3.35% by next June, and 3.10% three months later.
Let’s hope so.
The RBA added today that the data ‘do suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring.’
Make of that what you will. The RBA next meets in early February.
If you would like to review your home loan arrangements, contact Mortgage Broker Group.
We can assist with tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household prices.
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Finally, as we head into Christmas and the New Year, thank you for your trust in our services, and hope you have a safe, relaxing time over the festive break with your loved ones.