The Reserve Bank of Australia has maintained the cash rate at 3.60%, with Governor Bullock ruling out near-term rate cuts. The RBA is contemplating either holding the rate or a possible hike in 2026 if economic activity and inflation increase.<\/p>\n
The RBA noted capacity constraint pressures due to the economic recovery and poor productivity growth. While the labour market may slightly loosen, the bank remains cautious, assessing continued demand pressures versus one-off factors influencing inflation.<\/p>\n
Governor Bullock indicated the RBA board is considering a prolonged rate pause or hike in 2026, noting risks to activity and inflation have increased. She stressed the importance of analysing Q4 trimmed mean CPI to distinguish temporary price increases from enduring demand pressures.<\/p>\n
The bank’s current stance is to hold the cash rate steady through 2026. Despite the ongoing recovery, no significant demand pressure changes were detected in Q3 GDP growth. Capacity pressures may affect inflation, and upside risks to the cash rate outlook persist if inflation and activity data continue to exceed expectations. The RBA views the labour market as slightly tight, requiring a notable unemployment increase to re-evaluate economic risk balances.<\/p>\n
Given the RBA’s decision to hold the cash rate at 3.60%, the immediate focus shifts from pricing in rate cuts to assessing the probability of a hike. The governor has explicitly removed cuts from near-term consideration, meaning options strategies betting on lower rates have become significantly less attractive. We see this as a clear signal to flatten out any dovish positions.<\/p>\n
This hawkish pause suggests that short-term interest rate futures will need to reprice, erasing any remaining expectations for easing in the first half of 2026. The market should instead begin pricing in a non-trivial chance of one final hike. This skew supports positioning for higher front-end yields, potentially through selling Australian 3-year bond futures.<\/p>\n
The latest labour force data we saw from the Australian Bureau of Statistics for November 2025 showed the unemployment rate holding firm at 3.8%, which is historically low. This figure directly supports the central bank’s view that the labour market remains “a little tight”. Consequently, any wage growth data in the coming weeks will be scrutinized for signs of fueling inflation.<\/p>\n
All attention must now be directed towards the Quarter 4 trimmed mean CPI data, which we expect to be released in late January 2026. This single data point has been identified as the key determinant for the RBA’s next move. Implied volatility on the Australian dollar will likely rise as we approach this release date, presenting opportunities for traders using options like straddles.<\/p>\n
Looking back at the hiking cycle of 2022-2024, we remember the market repeatedly underestimating the RBA’s resolve to fight inflation. That experience suggests traders should be cautious about betting against a hawkish central bank, even with signs of a moderating economy. The risk is that capacity constraints and poor productivity, as mentioned, will keep underlying inflation stubbornly high.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" RBA holds rate at 3.60%, eyes 2026 hike amid inflation risks and economic capacity pressures.<\/p>\n","protected":false},"author":62,"featured_media":17021,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-36372","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36372","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=36372"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/36372\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17021"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=36372"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=36372"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=36372"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}