As expected, the Reserve Bank of Australia (RBA) decided to leave the cash rate target unchanged at 3.60% at its last meeting for the year. The decision was unanimous across the 9-member board. The RBA had previously cut the cash rate by 25-bps three times this year from 4.35% at the start of the year, UOB Group's Economist Lee Sue Ann notes.

Australia’s central bank signals caution as economy evolves

"As expected, the Reserve Bank of Australia (RBA) decided to leave the cash rate target unchanged at 3.60% at its last meeting for the year, following three 25- bps cuts earlier this year, citing upside risks to inflation and a cautious approach amid evolving economic data."

"The central bank noted upside inflation risks, recovering private demand, and a still-tight labour market; as it continues to closely monitor global and domestic developments to guide decisions, prioritizing price stability and full employment."

"We anticipate that restoring consumer demand will become the dominant issue ahead, likely requiring a more accommodative policy stance and additional rate cuts. For now, we are penciling two more 25-bps rate cuts by the RBA by 1H26."