Australian Bond Exchange Weekly Update
5th December 2025
Key Points
- Australia: The Reserve Bank of Australia (RBA) left the cash rate unchanged at 3.60% p.a. at its November meeting. The monthly CPI for October gained 3.8%(YoY). The annual trimmed mean inflation in Australia, a key underlying inflation gauge used by the Reserve Bank of Australia rose to 3.3 % (YoY).
- United States: The Federal Reserve cut its target cash rate by 0.25% to 3.75%–4.00%p.a. in October, they next meet on December 11.
- United Kingdom: The Bank of England (BoE) held interest rate steady at 4.00% p.a. at its November meeting. The October inflation stood at 3.6%(YOY) – still well above the BOE’s target of 2%.
- Eurozone: The European Central Bank (ECB) has maintained its deposit rate at 2.0% p.a. and Inflation in October was at 2.1%(YoY).
Here are the latest monetary‑policy and inflation figures for key economies:
| Region | Policy Rate | Latest Inflation (YoY) |
|---|---|---|
| Australia | Cash rate 3.60% p.a. (Reserve Bank of Australia, November 2025) | 3.8% to October 2025 (monthly CPI indicator) |
| United States | Policy range 3.75–4.00% p.a. (Federal Reserve cut 0.25% on 29 October 2025) | 3.0% to September 2025 (CPI) |
| United Kingdom | Bank rate 4.00% p.a. (Bank of England) | 3.6% to October 2025 |
| Eurozone | Deposit facility rate 2.00% p.a. (European Central Bank held rates steady) | Headline inflation ~ 2.1% (ECB projected average for 2025) |
Market Insights
- Australia’s Economy Grew by 0.4 % in the September 2025 Quarter
- Japan’s Rate Wake-Up Call: Why Markets Worldwide Should Care
- Countdown to December: Will the Fed Ease or Hold?
Australia’s Economy Grew by 0.4 % in the September 2025 Quarter
Australia’s economy grew 0.4% in the September quarter, taking annual growth to 2.1%, which was weaker than the 0.7% the market was expecting.
The rise was driven by “private investment and household consumption” (domestic demand), while changes in inventories and weaker net trade (imports rising faster than exports) detracted from GDP growth in the quarter.
According to official release from Treasurer Jim Chalmers’ department, private-sector recovery was the key takeaway: strong business investment (machinery/equipment investment, including data-centre expansion) and dwelling investment were central to the upswing.
Japan’s Rate Wake-Up Call: Why Markets Worldwide Should Care
BoJ Governor Ueda has signalled that a rate hike is possible at the 19 December meeting, marking a meaningful shift after years of ultra-easy policy. With the overnight rate still just 0.5% nominal (and about –2.5% real), the yen remains weak and JGB yields continue to rise, adding pressure to Japan’s already stretched fiscal position. Japan hasn’t seen negative real rates and high inflation together since the late 1970s, highlighting how accommodative current policy remains. Any move higher in rates could prompt Japanese investors to bring capital home.
Why is this important: Even a small BoJ rate hike could reverse decades of ultra-cheap Japanese capital, strengthening the yen, pushing Japanese bond yields higher, and triggering large outflows from global markets—including Australian fixed income—where Japanese investors are major players. This makes it a potential global market-moving event.
Countdown to December: Will the Fed Ease or Hold?
Many traders anticipate a 25 basis point rate cut at the December 9–10 meeting. Some pricing tools even imply a 70–85%+ chance of that move. Still, there’s growing caution: some economists now suggest the odds have fallen, with forecasts pointing to the Fed holding rates steady rather than cutting. If the Fed cuts rates, short-term bond yields, like 2-year Treasuries, will probably fall. Longer-term yields, such as 10 or 30-year bonds, might stay the same or even rise if the market sees the cut as positive for economic growth. This could steepen (more normalise) the yield curve—short-term rates lower, long-term rates higher.
Why is this important: A normal-shaped yield curve (long-term interest rates are higher than short-term rates) generally indicates that investors expect good economic growth in the future.
*Data accurate as at 05.12.2025
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