RBA Signals “Patient but Alert” Hold as Inflation Surprises to the Upside

Marking three straight holds, the Reserve Bank of Australia (RBA) maintained its cash rate unchanged at 3.60% during its December 2025 meeting, therefore supporting a data-driven strategy to monetary policy. The Board chose prudence as predicted by markets, citing consistent upside surprises in monthly inflation data, which have driven headline CPI over the 2–3% target band. The RBA stressed that no predetermined route exists, and every judgment will be based on inbound information, notwithstanding consistent GDP growth and strong labor market indicators like unemployment in the middle of 4%.

Policymakers showed a readiness to leave rates constant for a prolonged period while being on guard for evidence of more price increase given that inflation proved persistent. The statement's tone and recent economist surveys imply the danger of further rate cuts in 2026 has reduced; should inflation not moderate as predicted, the possibility of a rate hike in the coming year grows. Conversely, just a great softening in labor statistics and fresh disinflation would restore chances for cuts; following the most recent CPI readings, this is no longer the base scenario.

At the near end of the AUD rates curve, the policy stance reinforces the "higher for longer" perspective and lowers hopes for near-term relaxation in 2026. For currency markets, the mix of persistent inflation, cautious but somewhat hawkish RBA language, and slower easing elsewhere keeps the Australian dollar relatively supported—so long as global risk sentiment stays still.