MNI RBA Review-Dec 2025: Stance Skewed To Upside

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EXECUTIVE SUMMARY: 

• In a unanimous decision, the RBA’s Board decided to leave rates at 3.6% where they have been since August, which was expected. Governor Bullock clarified that a rate cut was not considered. 
• She said that 2026's discussions are likely to be around whether to leave rates at 3.6% or increase them, as the Board is uncomfortable with where inflation currently is. This suggests that the RBA's stance is skewed to the upside.
• Q4 CPI data on 28 January will be a key input into the 4 February decision and if it shows more persistent inflation, then the Board will question how tight financial conditions actually are and the size of capacity pressures. 
• Markets are pricing a steady build-up in tightening risk, with the implied probability of a 25bp hike rising from 38% in February to 102% by May and 205% by November 2026.