The Reserve Bank of Australia (RBA) is expected to keep interest rates unchanged at its December 9 policy meeting. Investors will be watching closely for any shift in tone as the central bank weighs persistent inflation and solid domestic demand.
Markets have mostly ruled out near-term rate cuts. Current expectations point to the RBA holding rates steady for an extended period.
A Reuters poll earlier this week showed economists unanimously anticipating that the cash rate will remain at 3.60%, where it has stayed since November. The outlook has also shifted toward a longer pause through 2026, driven by ongoing inflation pressures.
The RBA has repeatedly warned that inflation remains above its 2–3% target range. The latest trimmed-mean reading showed prices rising 3.3% year-on-year.
Recent economic data has supported the bank’s cautious stance. Australia’s economy grew 2.1% year-on-year in the third quarter, supported by steady household spending and strong underlying demand.
According to ING analysts, recent upside surprises in inflation and growth suggest that the chances of another rate cut have fallen sharply. They noted that this may indicate the RBA is nearing the end of its easing cycle.
Some major lenders have also suggested the December meeting could bring a more hawkish tone, or at least indicate that the central bank wants more flexibility as it moves into 2026. This makes Governor Michele Bullock’s remarks especially important.
How Will the ASX 200 React?
Australian stocks have been trading sideways in recent sessions. Markets showed little response to last week’s stronger-than-expected third-quarter GDP figures.
The S&P/ASX 200 has hovered around the flatline for nearly two weeks, struggling to build momentum after hitting a five-month low in November.
A hawkish hold could add pressure to Australian equities, while an unexpected rate cut would likely deliver a strong boost.
How Will AUD/USD React?
The Australian dollar strengthened sharply after the third-quarter GDP data reinforced expectations that the RBA will keep rates steady. The AUD/USD pair is now trading near its highest level since mid-September.
Any additional hawkish signals from the RBA are likely to support the currency, especially if Governor Bullock explicitly pushes back against expectations for further rate cuts.
