RBA Rate Expectations Swing, but Bond Investors Say the Market Has Overshot

As the Reserve Bank of Australia heads into its final meeting of 2025, the market has swung violently in its expectations, flipping from pricing rate cuts to predicting renewed hikes within a matter of days. But behind the noise, a growing share of bond investors argue that markets have simply raced too far, too fast.

The catalyst for the shift was two stronger-than-expected inflation reports, including the first monthly CPI release. Headline inflation jumped to 3.8%, and core inflation, the RBA's preferred measure, rose to 3.3%, both above target.

The response in markets was immediate. . .