Rate cut stays on wishlist as Christmas bonus off table

Borrowers are being warned interest rates are unlikely to be cut for much of 2026 as the Reserve Bank meets for its final monthly meeting of the year.

The central bank is tipped to keep the official cash rate at 3.6 per cent following its meeting on Tuesday, with homeowners unlikely to get financial relief on their mortgage before Christmas.

After three cuts throughout 2025, the cash rate is expected to remain on hold for much of 2026, with even the prospect of a rate hike being floated.

A recent rise in inflation has dashed the hopes of any further rate relief, with the latest data showing an uptick from 3.6 per cent to 3.8 per cent, well above the Reserve Bank's target band of between two and three per cent.

Trimmed mean inflation, which removes volatile price movements and is the central bank's preferred measure, was at 3.3 per cent in the 12 months to October.

It was likely the central bank and governor Michele Bullock would take a careful approach to tackling inflation, Westpac Group chief economist Luci Ellis said.

"The RBA is aware that some of the recent pick up in inflation is temporary but will be cautious given their view of potential output growth," she said.

"It will therefore remain emphatically on hold this month and for much of next year."

Ms Ellis said there was the potential for two rate cuts in 2026, with Westpac tentatively forecasting May and August as times for possible lowerings.

"Given the RBA's beliefs about potential output, this will not be its expectation," she said.

"It might therefore seek to further dampen expectations of future cuts."

Energy bill relief measures coming to an end were cited as one reason for the inflation rise.

Treasurer Jim Chalmers said the federal rebates would not be extended past the end of 2025.

"We've encouraged people not to see these as a permanent feature of the budget," he told reporters on Monday.