Honestly, it's been a bit of a rollercoaster. If you’ve been watching the interest rates australia news lately, you know the vibe in January 2026 is nowhere near as relaxed as we’d hoped back in late 2025. Right now, the official cash rate sits at 3.60%, but the real story is what’s brewing for the February meeting.
The Reserve Bank of Australia (RBA) didn't exactly hand out presents over the holidays. While they kept things steady at 3.60% in their December session, Governor Michele Bullock has been pretty blunt about the fact that they are "alert" to inflation creeping back up. Basically, the idea of a rate cut—which everyone was dreaming about six months ago—is starting to look like a fantasy. Instead, the big banks like CBA and NAB are now sounding the alarm on a possible hike as early as February 3, 2026.
The Inflation Headache and Your Back Pocket
Why are we even talking about more hikes? It mostly comes down to a messy inflation report.
In October, headline inflation spiked to 3.8%. People panicked. Then, the November data came out showing a drop to 3.4%. You'd think that's good news, right? Sorta. But the RBA looks at the "trimmed mean"—their favorite way of ignoring the wild stuff like fluctuating petrol prices—and that’s still stuck at 3.2%. Since their target is 2-3%, they aren't popping the champagne yet.
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Power bills are a massive part of the problem. Last year, we had those government energy rebates keeping a lid on things. Now those rebates have expired in places like Queensland and Western Australia, and the sudden jump in costs is hitting the data hard.
What Most People Get Wrong About the RBA
There is a huge misconception that the RBA wants to keep rates high. They don’t. They’re just terrified of 1970s-style inflation becoming the "new normal."
Wait, let's look at the actual numbers for a second. If the RBA does pull the trigger on a 0.25% hike in February, taking us to 3.85%, a typical $600,000 mortgage is going to cost about $100 more every single month. That’s on top of everything else getting more expensive. It’s a tough pill to swallow for households already feeling the pinch.
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The 2026 Meeting Schedule
The board changed how they do things recently. They only meet eight times a year now, which means when they do make a move, it feels much bigger. Here is what the rest of early 2026 looks like for your calendar:
- February 2–3: The big one. Everyone is watching this.
- March 16–17: Will they double down?
- May 4–5: Usually when the "May Budget" vibes start to influence spending.
Market Expectations vs. Reality
If you look at the ASX 30-day Interbank Cash Rate Futures (a fancy way of saying "what the big-money traders are betting on"), there’s about a 25% chance priced in for a hike in February. That’s not a certainty, but it’s a lot higher than the 0% chance we were looking at a few months ago.
Some economists, like those at AMP, are still holding onto hope that the RBA will stay paused. They point to the fact that unemployment is slowly edging up toward 4.4%. Their logic? If more people are out of work or worried about their jobs, they’ll stop spending, and inflation will die down naturally without needing another rate hike.
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It’s a high-stakes game of "wait and see."
Real-World Impact for Borrowers
If you're on a variable rate, you've probably already seen your bank creep their rates up even when the RBA does nothing. Banks have their own "funding costs," and right now, those costs are climbing.
What should you actually do?
- Don't wait for the RBA. If your rate starts with a "6" or heaven forbid a "7," you are likely overpaying. Many lenders are still offering sub-6% deals to lure in new customers.
- Check your "offset" account. If you’ve got extra cash sitting in a standard savings account, you’re losing money. Moving it to an offset account attached to your mortgage effectively "cancels out" the interest on that portion of the loan.
- Fixing is risky right now. Fixed rates are starting to climb because banks are anticipating these 2026 hikes. Locking in now might feel safe, but if the economy cools faster than expected and rates drop in late 2027, you could be stuck paying a premium.
The situation with interest rates australia news is moving fast. The January 28 CPI data release will be the final piece of the puzzle. If that number comes in hot, expect the RBA to act on February 3. If it’s cool, we might just escape this summer without another hit to the wallet.
Keep a close eye on your bank statements and be ready to pick up the phone to your broker. Loyalty doesn't pay in this market; staying informed does.