RBA Cash Rate Held At 3.60%

Why Did The RBA Hold The Cash Rate In December 2025?

At its December 2025 meeting, the Reserve Bank of Australia (RBA) kept the cash rate unchanged at 3.60%, taking a cautious stance as inflation picked up again in recent data and the economy continued to show signs of recovery.

The RBA statement highlighted four key reasons:

1. Inflation has picked up again and may not be temporary

Inflation has dropped a long way from its peak in 2022, but the latest monthly CPI readings show a renewed rise.

The Board believes some of this may be temporary. At the same time, there are early signs of more broadly based price pressures that could stick around.

2. The economy is recovering faster than expected

Private demand is strengthening and both consumption and investment have increased.

The housing market is also gaining momentum. Earlier interest rate cuts have not yet flowed through completely, so demand is expected to rise further, adding pressure to prices.

3. Labour market conditions remain a little tight

Unemployment has edged up and employment growth has slowed, yet the labour market remains strong.

Businesses report difficulty in finding workers, wage growth remains elevated, and unit labour costs remain high. All of these contribute to inflation risk.

4. Uncertainty Remains High

The economy has picked up more strongly than expected in recent months, which may increase capacity pressures.

Global uncertainty also remains significant, although Australia’s major trading partners have seen minimal impact so far.

Because these factors are moving in different directions, the Board chose to wait, observe the data and reassess as new information arrives.

Our Experts Take On The Board's Decision

Here is what our experts say about the cash rate decision and what it means for borrowers.

The RBA has held the cash rate, driven by the ABS’s October inflation print, which showed a renewed spike in CPI. The RBA may not have wanted to make any increases right before the Christmas period.

Bhisan Raj KC, General Manager - Mortgage Broking

As expected, the RBA maintained its wait-and-see approach for the moment. The latest sticky inflation print will be a concern, and now the question remains how the upcoming inflation data is going to look.

Chalmers is also talking about potentially adding back energy rebates, which would help with the inflation figures. Of course, that is not a true reflection of the economy, but that does affect the data from which the RBA makes its decisions.

With Christmas upcoming, even though the RBA is meant to be completely independent, the feeling is that the governors didn’t want to rock the boat too much and ruin everyone’s Christmas, but that means there is a risk that the board will be on the back foot if inflation spikes over a hot holiday season.

Jonathan Preston, Senior Mortgage Broker

So what does it mean for homeowners?

KC says, “For existing borrowers, a hold means little immediate relief. Lenders typically pass through changes slowly, so borrowers should expect repayments to stay at current elevated levels and consider loan-structure moves such as offsets, redraws or partial fixes to manage cashflow if required.

For new borrowers, a prolonged period of higher rates reduces borrowing power, increases the deposit needed and intensifies competition for entry-level stock. Obtaining formal pre-approval, preserving a three to six month repayment buffer and working with a broker to compare lender offers are pragmatic next steps.”

How The RBA Cash Rate Affects Interest Rates

Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers.

When the RBA raises the cash rate, lenders often increase their variable interest rates. This means your mortgage repayments go up.

When the RBA cuts the cash rate, lenders may lower interest rates. So, your repayments could go down. However, note that not all lenders pass on the full change.

If the cash rate is unchanged, your repayments usually stay the same. However, lenders can still change rates for other reasons.

Use our rate change calculator to find out what your repayments should look like whenever the cash rate changes.

Upcoming RBA Monetary Policy Board Meeting Calendar 2026

Source: rba.gov.au