RBA keeps rates unchanged at 3.6% as rates rise – realestate.com.au

Cash rates will remain unchanged until at least February as the Reserve Bank continues to grapple with a wave of inflation and an accelerating economy.

The RBA confirmed the decision at its final meeting of the year, joining market expectations by holding steady for the third month in a row.

“As expected, the RBA kept the cash rate steady at 3.60%,” said REA Group senior economist Eleanor Creagh.

In its statement after the meeting, the RBA board said recent data suggests risks to inflation have “tipped to the upside”, but said it will take slightly longer to assess ongoing inflationary pressures.

“The board therefore assessed that it was appropriate to remain cautious and update its view of the outlook as data develop,” the RBA said.

Mortgage households may view the outcome as positive, with growing concerns over persistent inflationary pressures and the RBA’s ability to manage them now pointing to rate hikes for 2026.

It’s a sharp reversal from October forecasts, which suggested Aussies could face another rate cut before the end of the year.

Two crucial pieces of data – the next consumer price index and employment figures – will determine which card the RBA will choose at its next meeting in February. In the meantime, the bank’s assessment of the labor market, unemployment rates and household spending over Christmas will inform its next set of pre-decision forecasts.

Interest rate increases coming?

The unexpected resurgence in inflation has been the talk of the market since the September quarter results confirmed that inflation rates were higher than the RBA had expected.

October Consumer Price Index data from the Australian Bureau of Statistics subsequently supported this, confirming that the truncated average inflation rate rose 3.3% annually. This inflation measure, which ignores volatile and one-off price movements, is the figure the bank relies on in its cash rate decisions and is now well outside the target range of 2-3%.

“Interestingly, the unemployment rate has fallen slightly to 4.3%. And while that’s great news for working Australians, a strong labor market will give the RBA confidence that interest rates can stay higher for longer,” said Mortgage Choice CEO Anthony Waldron.

Three of the four major banks do not expect another interest rate cut this cycle.

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HSBC released its forecast this week and is now anticipating a rate hike next year – a major move that comes after three of the big four banks dramatically scaled back their rate cut expectations.

Commonwealth Bank, ANZ and National Australia Bank all agree that borrowers will not see a rate cut in the near future, while lenders last week began tempering expectations and locking in fixed rate offers.

Westpac still expects two further rate cuts in 2026, likely in May and August.

House prices are still rising

The three interest rate cuts implemented earlier this year have already created new momentum on the housing market in 2025.

Average prices rose for eleven consecutive months and reached record highs in 2025, with several states seeing record growth.

“National house prices rose 0.5% in November and are now 8.7% higher than a year ago, the fastest annual growth since mid-2022,” confirmed REA Group senior economist Eleanor Creagh.

“Momentum has strengthened into 2025, but limited affordability means growth remains well below the 20-30% annual growth seen during previous economic booms.”

Perth (+15.5%), Darwin (+14.1%) and Brisbane (+13.7%) were the best performing capitals last year, while Sydney remains the country’s most expensive city to buy a home, with a highest ever average price of $1.24 million.

Regional areas have also increased in value in 2025, up 9.3% year-on-year, continuing to outpace capital cities over both the past twelve months and five years.

Eleanor Creagh, senior economist at REA Group.

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Lower interest rates are the price acceleration of the year, momentum that is likely to slow in 2026 as rising inflation undermines public confidence.

New year prospects

As for the RBA’s next step, Ms Creagh said the bank will “continue to pause mindfully” until persistent patterns in the data become clearer.

“The RBA will need clear evidence that inflationary pressures are easing again before cutting rates again,” she said.

“With interest rates expected to remain unchanged for an extended period of time, affordability constraints are likely to moderate house price growth in 2026.”