.jpg "Interest rate hikes firm amid hotter-than-expected inflation")
All big four banks now expect an increase to the the Reserve Bank cash rate next week after the latest inflation figures came in higher than forecast on Wednesday.
The Consumer Price Index (CPI) rose to 3.8% in the 12 months to December, up from 3.4% the previous month - markets had forecast 3.6%.
The RBA's preferred measure, trimmed mean inflation, also rose to 3.3% during 2025, up from a 3.2% read the previous month.
Westpac, ANZ join February rate hiker call
The hotter-than-expected data was enough to tip big bank holdouts Westpac and ANZ into the ranks of those expecting a February rise in the cash rate.
Both CommBank and NAB called a February hike last month as consecutive data showed inflation had again taken hold in the Australian economy towards the end of 2025.
Westpac's chief economist Luci Ellis said trimmed mean inflation at an annualised 3.4% for the December quarter was "the clearest signal of the underlying inflation trend".
"When the economy is close to full employment and full capacity utilisation ... inflation outcomes are the best guide in this situation," she said.
"This is one reason why inflation gets the 'casting vote' at the RBA's February meeting."
ANZ also noted Australia's tight labour market and that trimmed mean inflation (at 3.35% to two decimal places) was above the RBA's November forecast of 3.2%.
The big four, along with swathe of market forecasters, expect the monetary policy board to lift the cash rate by 25 basis points to 3.85% on Tuesday.
What will a rise in interest rates mean for mortgages?
A 0.25% rise to the cash rate would see repayments on an average Australian mortgage of $678,000 rise by around $115 a month for owner occupiers.
See also : Mortgage Repayment Calculator
It will also signal the end of Australia's run of three cash rate cuts in 2025 and may take some heat out of the housing market.
See also : Median house prices around Australia 2026
CPI data showed housing costs (up 5.5%), including new dwelling prices and rent, were the biggest contributor to annual inflation over the past 12 months.
But many analysts are not expecting a long run of cash rate hikes in 2026.
Ms Ellis said a cash rate increase next week might not necessarily be followed up with "a sequence of back-to-back hikes".
She said the amount of disinflation to get the trimmed mean back into the RBA's target zone of 2-3% remains modest.
Ms Ellis, along with many other economists, expect the board may wait some time before moving the cash rate again.
Similarly, ANZ describes a February rate hike as a single "insurance" tightening, not the start of a series of rate hikes.
The RBA's monetary policy board will meet on 2-3 February with its announcement on the cash rate scheduled for Tuesday afternoon.
Advertisement
| Lender | Home Loan | Interest Rate | Comparison Rate* | Monthly Repayment | Repayment type | Rate Type | Offset | Redraw | Ongoing Fees | Upfront Fees | Max LVR | Lump Sum Repayment | Extra Repayments | Split Loan Option | Tags | Features | Link | Compare | Promoted Product | Disclosure |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
5.29% p.a. | 5.33% p.a. | $2,773 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure | ||||||||||
5.19% p.a. | 5.10% p.a. | $2,742 | Principal & Interest | Variable | $0 | $0 | 80% |
| Disclosure | |||||||||||
5.39% p.a. | 5.43% p.a. | $2,805 | Principal & Interest | Variable | $0 | $530 | 90% |
| Promoted | Disclosure |
Image by Mikhail Nilov via Pexels
Share