By Devayani Sathyan
BENGALURU, Dec 5 (Reuters) – The Reserve Bank of Australia will hold its cash rate at 3.60% on Tuesday and keep it there through 2026, according to a Reuters poll, a shift from last month when a majority of economists expected at least one rate cut next year.
After lifting rates to a 12-year high of 4.35%, the RBA has cut 75 basis points this year, but expectations for another cut faded after inflation in the latest monthly data rose to 3.2%, above the central bank’s 2%-3% target range, suggesting policy may not be as restrictive as thought.
Australia’s economy grew at its fastest annual pace in two years, and a strong labour market should allow policymakers to keep rates on hold to focus on taming inflation.
All 38 economists in the December 1-4 poll expected the central bank to leave its official cash rate unchanged at the end of its two-day meeting on December 9.
“Given recent data…the RBA is likely to remain on hold for an extended period. We no longer expect another 25bp cut to the cash rate. Inflation has risen above the 2-3% target band and is too challenging for the RBA to look through,” said Craig Vardy, head of Australia fixed income at BlackRock.
“The prudent course of action for the foreseeable future would be to keep the cash rate on hold.”
MOST ECONOMISTS EXPECT RATES TO REMAIN UNCHANGED
In the November poll, over 60% expected at least one more cut to come by April-June, a view held by less than one-third in the latest poll.
Among economists who had a rates forecast until the end of 2026, a strong majority 19 of 33 expect rates to stay unchanged at 3.60%, and 10 forecast at least one cut. The remaining four expected the RBA to hike at least once.
That minority view aligns with a broader shift in sentiment, with many now saying the balance of risks has tilted toward a hike. Interest rate futures are pricing in over a 70% chance of a hike by the end of next year.
“Our base case remains a pause in 2026…However, in the near term, risks are skewed to hikes as inflationary pressures continue to rise. If inflation accelerates sustainably above the RBA’s forecasts, and the labour market tightens, we anticipate that the RBA may hike, but the hurdle for a hike is high,” said Nick Stenner, head of Australia and New Zealand economics at BofA.
Westpac is the only major bank still forecasting further cuts in 2026, while ANZ, CBA, and NAB all expect a long hold.
(Other stories from the December Reuters global economic poll)
(Reporting by Devayani Sathyan; Polling by Veronica Khongwir, editing by Ed Osmond)
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