The Reserve Bank of Australia (RBA) has kept its interest rate at 3.6%, which aligns with what the market expected. This decision comes as inflation remains high, above the RBA’s target, while the job market stays tight.

Impact of the Interest Rate Decision

The RBA is trying to manage inflation while also promoting economic growth. Inflation is likely to continue being a challenge, so the RBA will keep a close watch on it. The bank emphasizes sticking to its current strategy until there is a noticeable drop in inflation rates. After the interest rate decision, the Australian dollar showed mixed reactions. Investors will pay attention to any signals from the RBA, particularly regarding the domestic economy. Reflecting on earlier this year, the Reserve Bank of Australia set its interest rate at 3.6% in early 2023 due to rising inflation. This was part of a longer strategy to regain control over inflation. Since then, the situation has significantly improved. By late 2025, the results of that policy are clear, with recent quarterly inflation showing a decrease to 3.1%, slightly above the RBA’s target range. However, the unemployment rate has risen to 4.2%, a slight increase from the very low levels of previous years. Now, the market is shifting its focus from potential rate hikes to when and how rates might be cut.

Market Strategies and Predictions

For those trading derivatives, the next few weeks will focus on anticipating a shift towards a more cautious RBA. Traders might want to buy 30 Day Interbank Cash Rate Futures, as the expectation is for lower rates in 2026. The RBA’s December meeting will be crucial, as any hints of easing will boost this strategy. In currency trading, the Australian dollar could be affected by these changes, especially if expectations for rate cuts here are quicker than in the United States. Buying AUD/USD put options could be a good way to safeguard against or profit from a fall below the 0.6500 mark. Using put spreads can also help limit risk while taking advantage of this outlook. Implied volatility is another important factor, as there’s a lot of uncertainty about when the first rate cut will happen. We expect an increase in volatility for both bond futures and AUD options as we near the end of the year and more data comes in. Buying straddles on the AUD could be a smart strategy, allowing traders to benefit from expected price movements after the next big inflation report. Create your live VT Markets account and start trading now.

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