The Reserve Bank of Australia (RBA) has kept the cash rate steady at 3.6 percent at its final meeting of the year, cautioning that inflation risks have “tilted to the upside” and signalling it would respond if price pressures persist.
“The pick-up in momentum has been stronger than anticipated, particularly in the private sector. If this continues, it is likely to add to capacity pressures,” the RBA said in its post-meeting statement released on Dec. 9.
Headline inflation climbed to 3.8 percent in October, outside the RBA’s 2–3 percent target band and above market forecasts.
The Bank acknowledged that inflation had eased materially from its peak, but noted signs of renewed strength.
“There is uncertainty about how much signal to take from the monthly CPI data … Nevertheless, the data does suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring,” the RBA said.
Last week, Governor Michele Bullock told Senate Estimates that the recent spike appeared “mostly temporary,” but warned that if inflation proved more entrenched there would be “implications for the future path of monetary policy.”
The RBA pointed to firmer economic conditions and a recovery in household spending and business investment.
“Growth in private demand has strengthened,” the statement said, adding that housing activity and prices continue to rise.
Energy Costs Add Pressure
The decision comes a day after Treasurer Jim Chalmers confirmed electricity rebates will not continue beyond December 2025.Prices jumped 37.1 percent in the latest Australian Bureau of Statistics figures, with state rebates ending in Queensland and Western Australia contributing to the increase.
Power bills were believed to be one of the key reason for the inflation spike.
Excluding rebates, electricity prices were still up 5 percent, reflecting annual retail price resets.
