RBA governor rules out interest rate cuts after cash rate pause

At the final meeting of 2025, the board unanimously agreed to make no change to the cash rate in light of a recent pick up in inflation.

It was a widely expected decision and further evidence that the central bank is likely at the end of its rate-cutting cycle.

Reserve Bank governor Michele Bullock confirmed this in her post-meeting media conference, telling reporters the most likely move in 2026 was a cash rate increase, based on the data at this point in time.

"What we know at the moment, I don't think there are interest rate cuts in the horizon for the foreseeable future," she said.

"The question is, is it just an extended hold from here, or is it possibility of a rate rise?"

Inflation has in recent months tracked higher than the central bank's forecasts and has become a concerning figure for the Reserve Bank.

The consumer price index rose 3.8 per cent in the 12 months to October, up from 3.6 per cent in September, according to the Australian Bureau of Statistics' latest figures.

Trimmed mean inflation, the Reserve Bank's preferred measure, was 3.3 per cent in 12 months to October 2025, up from 3.2 per cent the month before.

In its statement on the decision, the Reserve Bank board said there was uncertainty about how much weight it could give to the figures, as they were part of a new complete monthly CPI data series.

"Nevertheless, 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," it said.

Ms Bullock confirmed a cash rate cut was not considered or discussed by the board at its December meeting.

"We didn't explicitly consider the case for a rate rise at this meeting, but we did consider and discuss quite a lot the circumstances and what might need to happen if we were to decide that interest rates had to rise again at some point next year," she said.

With the federal government announcing on Monday it would not extend household energy rebates, the Reserve Bank expects to have a clearer view of headline inflation.

"We have also been mindful of the timing of electricity rebates and their temporary effects on inflation data," Ms Bullock said.

"Rebates temporarily lower headline inflation, and as they roll off, the headline inflation will move higher.

"The board looked through these effects when rebates were put on, and is going to do so again as they come off."

Appearing before a Senate estimates committee in early December, Ms Bullock said inflation was expected to remain above the 2 to 3 per cent target band for the near future.

"Our current forecasts, November, we see headline inflation coming back in the band in 2027 and back towards the mid-point at the end of the forecast period," she said.

All 35 experts and economists surveyed by comparison website Finder had expected the Reserve Bank to hold the cash rate steady at 3.6 per cent in December.

Almost one in three experts believe at least one rate rise is on the cards in 2026, while another third have forecast at least one rate cut.