What to expect from the RBA meeting in December 2025

As the year draws to a close, nobody is really expecting the Reserve Bank of Australia (RBA) monetary policy board to change the national cash rate at its meeting in December 2025. Given recent inflation statistics, the question is when another rate cut could arrive, or even if a rate rise could be on the cards for the future.

According to the latest figures from the Australian Bureau of Statistics (ABS) the Consumer Price Index (CPI) rose 3.8% in the 12 months to October 2025, up from 3.6% in the 12 months to September 2025. The RBA’s preferred metric, trimmed mean inflation, was also up reaching 3.3% in the 12 months to October 2025, up from 3.2% in the 12 months to September 2025. The RBA’s target is to keep trimmed mean inflation stable between 2% and 3%, by raising or lowering the cash rate.

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RBA says more work to be done on inflation

Speaking to a recent Senate estimates committee hearing, RBA Governor Michele Bullock said that if inflationary pressures were more permanent, it would “have implications for the future path of monetary policy”.

Government debt was named as one of the various factors influencing the RBA’s monetary policy decisions:

“All other things equal, if there are less savings in the economy – and that includes by the government as well as private sector – and at the same time investment doesn’t come down, then that would put upward pressure on the neutral rate… I emphasise that there’s domestic factors here, but there’s also global factors … we don’t control global factors.”

ANZ changes its forecasts

ANZ recently updated its monetary policy forecasts, removing its previous prediction of a rate cut in the first half of 2026 in favour of the cash rate remaining on hold for the full calendar year.

“We think the lift in trimmed mean inflation in Q3 is likely temporary, but signs of ongoing inflation pressures in the (new) monthly CPI, GDP growth running around the RBA’s estimate of potential and the RBA’s view that the labour market is tight all suggest the RBA’s Board is likely to be cautious about further easing.”

Looking ahead, the rise in the unemployment rate this year and conflicting signals across leading indicators of demand make it difficult for ANZ to see a case for a 2026 rate hike. But if trimmed mean inflation remains persistently above the target, and unemployment remains stable, the Board could conclude that the economy is operating above potential, making a small increase in the cash rate appropriate. Alternatively, if there is easing in the labour market, and in turn softer real income growth, dampening consumer sentiment and household spending, the Board could decide the economy could afford to grow a little faster and cut rates.

Commonwealth Bank see potential for hawkish future

Economists from the Commonwealth Bank are expecting the RBA board to unanimously decide to keep the cash rate on hold at its December 2025 meeting. The cash rate is then expected to remain on hold for the remainder of 2026.

“We do not think a rate hike will be explicitly considered in December, but neither would a rate cut. But there will have to be an acknowledgement of the shifts to the balance of risks for both the economy and inflation.”

Commonwealth Bank expects the RBA won’t make a move on rates until after the end of January 2026, when a full quarter of CPI data will be available. If higher inflation does not prove temporary, the February meeting could see a shift in language and discussion of rate hikes.

NAB sees no further easing

NAB economists are also predicting that the RBA will keep rates on hold for an extended period, having previously forecast a May 2026 cut. The three factors for changing its tune were the shift in the inflation backdrop; the dynamics around recent growth outcomes; and growing evidence to support the RBA’s recent admission that it now is less certain that a cash rate of 3.6% is “…a little on the restrictive side.”

NAB also said that while the RBA could also be considering higher rates, time is on its side, as economic conditions that affect monetary policy having scope to change in the future.

“Looking ahead, we expect the RBA to remain on hold while it continues to assess both underlying inflation dynamics and the balance (or otherwise) between aggregate demand and supply. But should data continue to suggest an acceleration in growth, evidence of a tighter labour market and / or further margin expansion, then the outlook for Australian monetary policy could shift in a less benign direction. Of course, risks to the outlook are two-sided. An earlier-than-expected resumption of disinflation, together with evidence of a weakening labour market, would bring the prospect of further easing back into play.”

Westpac still counting on a May 2026 cut

Westpac also does not expect a rate change in December 2025. However, at the time of writing it is the only one of Australia’s big four banks to still be predicting rate cuts in 2026. One 25-point cut is expected in May 2026, with a second to follow later, bringing the cash rate down to 3.10%.

Part of why Westpac is sticking to its existing forecasts is because of the recent change to how the ABS presents its inflation data, going from quarterly to monthly figures. As the RBA has historically focused primarily on quarterly trimmed mean inflation, Westpac expects that the central bank may wait until it has at least a quarter’s worth of monthly data to analyse before making monetary policy decisions. It may take even longer before the RBA can start meaningfully interpreting the monthly data:

“The ABS currently does not have enough history to complete a full seasonal adjustment process for all the components of the Monthly CPI. The ABS has also noted it will take at least 18 months to gather that data so it is likely to be a year and a half before we have a better understanding of monthly core inflation dynamics and so will be able to make a more detailed assessment of core inflation directly via the monthly TM (trimmed mean).”