RBA Holds at 3.6%: Here’s When the Next Rate Move Is Expected

RBA rate hold: what it means for ASX investors

The Reserve Bank of Australia held the cash rate steady at 3.6 per cent at its final meeting of 2025, marking the third consecutive pause after three cuts earlier in the year. For mortgage holders hoping for more relief, the decision signals that the easing cycle may well be over. More importantly for investors, money markets have now fully priced in a rate hike by the end of 2026, a dramatic shift from expectations of further cuts just weeks ago. The key question now is whether inflation will force the RBA’s hand in early 2026.

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Why the RBA Hit Pause, And Why Hikes Are Back on the Table

The latest inflation numbers explain everything. Prices rose 3.8% over the past year, which is higher than the RBA’s ideal range of 2–3%. Even the “trimmed mean” inflation, a measure that removes volatile items like fuel, went up to 3.3%, showing that the rise in prices is not just a temporary spike.

The RBA admitted that although inflation has come down a lot since 2022, it has started rising again. They also see early signs that inflation is becoming broader and more persistent, which is worrying.

There’s another reason the RBA can’t cut rates right now: the economy is still strong.

• Unemployment is only 4.3%, which is quite low.
• The economy grew 2.1% over the past year, the fastest in two years.

This shows that Australia doesn’t need extra economic support. In fact, when you combine stubborn inflation with solid economic growth, it creates a situation where rate hikes, not cuts, might be needed to keep prices under control.

When Is the Next Rate Move Expected?

The Reserve Bank of Australia’s next meeting is set for 4 February 2026, and the decision will hinge on two key inflation updates. The November CPI arrives on 7 January, followed by the more important Q4 CPI on 28 January. Economists say the Q4 release is the one to watch: if the trimmed mean inflation comes in above 0.8% quarter-on-quarter, the chances of a February rate hike rise sharply. In simple terms, if inflation proves stronger than expected, the RBA may lift rates early next year.

Right now, the balance of risks points upward. The RBA has been clear that it won’t allow inflation to stay above its 2-3% target for long, and recent data suggests price pressures are not easing enough. That means the next move is more likely to be a rate increase, with the central bank signalling a higher-for-longer stance rather than a return to easy money.

What This Means for ASX Investors

A prolonged pause, or even a rate hike, has clear implications for ASX investors.

The big four banks- Commonwealth Bank (ASX: CBA), NAB (ASX: NAB), Westpac (ASX: WBC), and ANZ (ASX: ANZ) tend to benefit when interest rates stay high because it widens their net interest margins, the difference between what they earn on loans and pay on deposits. For example, CBA’s margin rose to about 2.08% in FY25, up 9 basis points from the prior year. However, with CBA trading at around 25 times earnings, expensive compared to global peers, investors may find better value in NAB or ANZ.

On the other hand, rate-sensitive growth stocks face challenges, especially those with high valuations tied to future earnings. Highly leveraged REITs and property developers also struggle when borrowing costs remain elevated. The takeaway is to focus on quality, cash-generating businesses that can perform well regardless of the rate path.

The upcoming February RBA meeting, shaped by the Q4 CPI release, will be the next big catalyst and could set the tone for whether 2026 brings stability or renewed rate uncertainty.