RBA Holds Cash Rate Steady Amid Inflationary Pressures

Recent data indicates that inflation has risen to 3.2%, surpassing the RBA's target range of 2%-3%. Additionally, the Australian economy has experienced its fastest annual growth in two years, accompanied by a strong labor market. These factors suggest that the current monetary policy may not be as restrictive as previously thought.

A Reuters poll conducted from December 1-4 revealed that all 38 surveyed economists anticipate no change in the cash rate at the upcoming meeting. Furthermore, a strong majority now expect the RBA to hold rates steady through 2026. Of the 33 economists with projections through 2026, 19 foresee rates remaining at 3.60%, 10 predict at least one cut, and 4 anticipate a rate hike.

Interest rate futures indicate over a 70% probability of a rate increase by the end of 2026. However, some analysts caution that while inflationary pressures could prompt the RBA toward a hike, such a move would require sustained inflation and a tighter labor market. Notably, Westpac remains the only major bank still expecting rate cuts in 2026.

For consumers and businesses, this outlook suggests a period of interest rate stability, allowing for more predictable financial planning. However, it's essential to remain vigilant, as any significant changes in economic indicators could influence future monetary policy decisions.