Economists now expect the RBA to hike rates to 3.85% in February after inflation surprised to the upside, though most see only limited further tightening.
Via Reuters polling.
Summary:
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A strong majority of economists now expect the RBA to lift the cash rate by 25bp to 3.85% on February 3.
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The shift follows hotter-than-expected Q4 inflation, particularly in the trimmed mean measure.
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Expectations have flipped sharply since December, when most forecasters anticipated rates staying at 3.60%.
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Major Australian banks now all forecast a February hike, though few see a prolonged tightening cycle.
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Economists expect rates to remain broadly on hold through 2026 once the peak is reached.
Expectations for Australian monetary policy have shifted decisively, with most economists now forecasting a February rate hike from the Reserve Bank of Australia after inflation surprised on the upside late last year.
According to a Reuters poll, 24 of 31 economists expect the RBA to raise the cash rate by 25 basis points to 3.85% at the conclusion of its February 3 policy meeting. Just seven respondents anticipate no change. The revised consensus marks a sharp reversal from December, when more than 85% of economists expected the RBA to remain on hold at 3.60% during the first quarter.
The catalyst for the shift was the December-quarter inflation report. The trimmed mean consumer price index — the RBA’s preferred gauge of underlying inflation — rose 0.9% quarter-on-quarter, beating expectations for a 0.8% increase. That pushed annual trimmed mean inflation to 3.4%, its highest level in five quarters and clearly above the central bank’s 2–3% target band.
Economists argue the inflation data carried decisive weight in the policy debate. With the economy operating close to full employment and capacity utilisation still high, price outcomes have become the clearest guide for policymakers assessing whether settings are sufficiently restrictive. Several analysts stressed that the inflation result tipped the balance in favour of tightening.
Even so, the expected February hike is not widely seen as the start of an aggressive tightening cycle. The move would come just six months after the RBA’s last rate cut, underscoring the bank’s sensitivity to incoming data rather than a fixed policy path. Many economists expect the RBA to adopt a “wait-and-see” approach after February, signalling a willingness to act again if required but stopping short of committing to multiple hikes.
Australia’s major banks, ANZ, Commonwealth Bank of Australia, National Australia Bank and Westpac, all now expect a February hike. Goldman Sachs and Deutsche Bank expect a hold.
Looking further ahead, economists are divided on the terminal rate. Of those surveyed, some see rates peaking at 4.10%, others at 3.85%, with a smaller group expecting a return to 3.60% by end-2026. Separate polling suggests inflation is likely to ease back inside the target band later this year, reinforcing expectations that any further tightening beyond February will be limited.
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2026 Reserve Bank of Australia dates:
This article was written by Eamonn Sheridan at investinglive.com.