RBA Holds at 3.60%: The November Cut That Isn’t Coming

The Reserve Bank of Australia (RBA) recently announced it was holding its cash rate at 3.60%, putting to rest widespread speculation that a rate cut would be in the cards for November 2025. Many Australians were hoping for relief from the increasing cost of living, with rate cuts potentially easing mortgage repayments. However, this latest announcement signals that the RBA remains focused on addressing inflation and economic stability, rather than accommodating a quicker recovery. With major Australian banks, such as CBA and NAB, abandoning their forecasts for a 2025 rate cut, it’s clear that the much-anticipated November cut is no longer in the pipeline.
This decision has significant implications for the Australian economy, inflation management, housing market dynamics, and investment strategies. In this blog, we’ll explore why the RBA chose to hold its rate, how this impacts different sectors, and what it means for Australian investors navigating an unpredictable economic environment.

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Why the RBA Stayed at 3.60%: Key Drivers

CBA and NAB Abandon the November Cut Forecast

Australia’s largest financial institutions, Commonwealth Bank and NAB, recently abandoned their predictions of an interest rate cut in November 2025. This shift in expectations highlights the growing recognition that the Australian economy is not yet ready for a rate reduction. While early forecasts anticipated that the combination of slowing inflation and weakening consumer demand would necessitate a cut, economic data have suggested otherwise. As inflation remains persistent and key economic sectors, like housing, show resilience, the outlook for a rate reduction has been pushed back further into 2026.
For investors, this change in sentiment adds a layer of uncertainty. Initially, rate cuts were seen as a potential boon for borrowing and market liquidity, but now, with the banks adjusting their forecasts, the expectation of lower rates in the near term has diminished. Investors will need to prepare for an environment where rates may stay higher for longer, affecting everything from housing to stock market performance.

Inflationary Pressures: The Trimmed Mean Inflation at 2.7%

The RBA’s decision to hold the cash rate at 3.60% is largely driven by the ongoing inflationary pressures in Australia. While the trimmed mean inflation rate is stabilising at 2.7%, it remains near the upper bounds of the RBA’s target range. Inflation, especially in housing, energy, and groceries, has been more persistent than anticipated, meaning the RBA cannot afford to ease monetary policy too quickly. A rate cut, which could stimulate demand and potentially reignite inflation, remains a distant possibility. The RBA’s cautious stance underscores the need to ensure that inflation expectations remain anchored. By keeping the cash rate at 3.60%, the central bank aims to continue addressing price pressures while ensuring the economy can navigate through global and domestic uncertainties.

Housing Market Strength: No Immediate Relief

Contrary to expectations, the Australian housing market has shown considerable resilience despite rising interest rates. Property prices, particularly in Sydney and Melbourne, have not fallen as sharply as anticipated, with low housing supply and strong buyer demand supporting the market. Additionally, the ongoing strength of housing construction and home renovations suggests that the market is far from a downturn. This complicates the RBA’s decision-making, as a rate cut could drive housing prices even higher, exacerbating affordability issues.
Although the housing market has not softened as expected, it remains a key concern for the RBA. Any potential rate cut could reignite demand, further fueling price growth. Thus, keeping rates at 3.60% is seen as necessary to maintain the balance between fostering growth and controlling housing affordability.

Bank Net Interest Margins (NIM) and Profitability

Banks have benefited significantly from the high-interest-rate environment. Net interest margins (NIM), the difference between what banks charge for loans and pay on deposits, have been wide, contributing to strong profitability. With banks posting robust earnings and strong dividend payouts, the RBA’s rate hold ensures that these conditions remain favourable for the financial sector. A rate cut could reduce bank profitability, potentially affecting dividend payouts, which many Australian investors rely on for steady income. However, the RBA also recognises that prolonged elevated rates could slow down broader economic growth. As a result, it has to weigh the immediate benefits of strong financial institutions against longer-term economic sustainability.

Implications for Investors: What’s Next?

Impact on ASX Bank Dividends

For investors, especially those focused on dividend stocks, the RBA’s decision to hold the rate provides some certainty. Banks, such as CBA and NAB, have enjoyed record profits in recent years, thanks to the high-rate environment. These strong profits have translated into solid dividends for investors. With the cash rate holding steady at 3.60%, the banks are expected to maintain their profitability, potentially offering reliable dividend returns for shareholders.
However, investors should be cautious in the long term. If rates remain high for an extended period, consumer spending may decline, impacting economic growth. This could eventually filter through to bank earnings, particularly if loan defaults or slower loan growth occur. Investors will need to monitor bank performance closely, especially as the global economic environment continues to evolve.

Australian Dollar (AUD) and International Trade

The decision to keep rates at 3.60% could help support the Australian Dollar (AUD). High interest rates typically attract foreign investment, which in turn bolsters the value of a nation’s currency. For those involved in international trade or holding USD-denominated assets, the rate hold could provide some short-term relief by strengthening the AUD.
However, global factors such as US Federal Reserve rate cuts or economic slowdowns in major trading partners like China could impact the strength of the AUD in the longer term. As such, while the RBA’s decision may benefit the AUD in the short term, broader geopolitical and economic conditions will continue to shape its performance.

Investment Strategy: Adaptation to Rate Decisions

For investors, the key takeaway from this RBA decision is that interest rates are likely to remain elevated for longer than originally anticipated. Sectors that are sensitive to interest rates, such as real estate and consumer discretionary stocks, might not see the same growth rates that were previously expected. Investors may want to explore opportunities in sectors like technology, healthcare, or infrastructure, which tend to be more resilient in a high-rate environment.
Dividend investors should continue focusing on financial stocks and other income-generating assets. However, diversifying into growth sectors that are less affected by monetary policy could help balance any potential downside from interest rate sensitivity.

Conclusion

In conclusion, the RBA’s decision to hold interest rates at 3.60% reflects its cautious stance on balancing economic growth with inflation control. While this provides some stability for the time being, it indicates that high borrowing costs will persist, potentially dampening consumer spending and slowing down investment. For investors, the decision shifts expectations, with bank stocks continuing to benefit from higher rates in the short term. However, the longer-term outlook remains uncertain, and diversifying portfolios into more resilient sectors such as technology, healthcare, and infrastructure may offer protection against the risks of prolonged elevated rates. Staying informed about ongoing economic indicators, including inflation and global economic developments, and adjusting investment strategies accordingly, will be crucial for navigating the challenges ahead in a dynamic market environment.

FAQs

• Why did the RBA decide to hold interest rates at 3.60% in November 2025?

  The RBA held rates at 3.60% due to ongoing inflationary pressures, strong private demand recovery, and resilience in the housing market. The central bank opted to maintain its stance to keep inflation in check and avoid reigniting demand that could further push prices higher.

• How does the RBA’s rate decision affect Australian homeowners?

  For homeowners with variable-rate mortgages, the RBA’s decision means no immediate relief from rising interest costs. However, for those looking to purchase, the current rate environment may still discourage excessive borrowing, keeping property prices in check.

• How do interest rates at 3.60% impact Australian investors?

  The steady rate of 3.60% offers some stability for investors, especially in dividend stocks like banks. While high rates boost bank profitability, prolonged periods of elevated rates could slow down broader economic growth, impacting long-term stock market performance.

• Will the RBA cut rates in 2026?

  While there is no immediate indication of a rate cut, the possibility remains for 2026, depending on economic conditions, including inflation and employment rates. Investors should prepare for a potentially slow and gradual easing of rates in the coming years.

• How can investors navigate the current economic uncertainty?

  Investors should diversify their portfolios to include both income-generating stocks and growth sectors. Monitoring interest rate movements and inflation data will be key to adjusting strategies to ensure long-term stability and growth.