The RBA decided to avoid the drama this festive season and held the cash rate at 3.60%.

This year Aussie mortgage-owners were treated with three rate cuts in a much needed easing cycle, but recent inflation data has been on the RBA’s naughty list.

The latest numbers show October’s CPI rising to 3.8% and the RBA’s preferred metric, trimmed mean inflation, also jumped to 3.3%... outside the RBA’s target of 2-3%. In other words, people are spending more and prices of goods and services are increasing faster than expected!

Anyway, that’s why all four major banks predicted a rate pause for December.

What happens when the cash rate is paused?

We continue with the status quo.

If you’ve got a variable-rate home loan, your interest rate and mortgage repayments remain the same.

And good news for savers, your interest earning accounts just avoided a hit, so you’ll keep earning at your current interest rate.

Looking back at Australia’s cash rate

With less than a month until the new year (kind of terrifying I know), there ain’t no better time to look back on how inflation has moved and how the RBA has responded.

Rewind to May 2022, the RBA first started increasing the cash rate when monthly inflation was 7.2%. And in the 20 months following, the cash rate jumped up 13 times from 0.1% to 4.35%.

After that, Aussies waited in anticipation for over a year while the RBA kept the cash rate on hold (at 4.35%) for all of 2024.

Finally, in February this year, the RBA gave the people what they wanted and started a slow and cautious cutting cycle. This resulted in three rate cuts that brought the cash rate from 4.35% back down to 3.60%.

But the good times can only last if inflation stays in check. With recent inflation data, some economists are saying the cutting cycle might be over… but others are still hopeful.

Here’s what the four major banks predict for 2026:

• CBA - Cash rate hold for an extended period
• NAB - Cash rate hold for an extended period
• ANZ - Cash rate hold for an extended period
• Westpac - Two more cuts to bring the cash rate down to 3.10%

The big picture

While it might feel like the cash rate is currently quite high, you might have just gotten used to the rock-bottom cash rate during the pandemic.

In the bigger picture, it’s not all that extreme. Back in the mid-2000s, the cash rate was hanging around 6% to 7%, so today’s level is more middle-of-the-road.