RBA Maintains Cash Rate at 3.6%; Future Increases Possible Based on Inflation Data

"The primary policy options under consideration are an extended period of holding rates or a potential increase," RBA Governor Michele Bullock stated, with rate cuts not anticipated "on the horizon for the foreseeable future."

RBA Holds Cash Rate at 3.6% as Inflation Persists Above Target

The Reserve Bank of Australia (RBA) has held the official cash rate at 3.6% following its February 2026 meeting. This decision comes after a period of three rate cuts in 2025 and amid mixed signals from economists and financial markets regarding the trajectory of monetary policy.

Current Monetary Policy Stance

The RBA board decided unanimously to maintain the cash rate at 3.6%, where it has remained since August 2025. RBA Governor Michele Bullock stated that a rate hike was not considered at the February 2026 meeting, and the board is adopting a "wait-and-see" approach to assess the impact of previous rate adjustments.

RBA Deputy Governor Andrew Hauser has reinforced this position, stating that interest rate reductions are unlikely in the near term. Hauser emphasized the RBA's focus on achieving its inflation target over a one-to-two-year period rather than reacting to short-term fluctuations.

Inflation Data and Economic Context

The most recent consumer price index (CPI) data, released by the Australian Bureau of Statistics (ABS) on January 7, 2026, covers the period ending November 2025.

• Headline CPI: 3.4% annual increase
• RBA's preferred trimmed mean measure: 3.2%

Both figures remain above the RBA's target range of 2-3%.

Deputy Governor Hauser described the latest inflation data as "helpful" but consistent with expectations. He stated that the RBA's current projection shows underlying inflation for the December quarter of 2025 may be slightly higher than the forecasts issued in November.

The ABS is scheduled to release the December quarterly CPI data on January 28, 2026. Deputy Governor Hauser indicated this quarterly figure would be "crucial" for informing the RBA's current assessment of inflation.

• Unemployment: The unemployment rate remained at 4.3% in November 2025, although total employment levels decreased.
• Consumer Spending: NAB data showed a 1.1% rise in consumer spending in May 2025, while mortgage demand has fallen significantly, particularly among first home buyers.
• Fuel Excise: The fuel excise discount is scheduled to end on June 30, 2026, which could increase petrol prices by approximately 30 cents per litre.

Market and Economist Expectations

Financial markets assign a 34% probability of a rate hike at the February 2026 meeting, suggesting the most likely outcome is a steady cash rate. By June 2026, market pricing indicates a 93% chance of a rate hike, with a 0.25 percentage point increase fully priced in by August 2026.

Major bank economists have presented divergent forecasts:

• NAB: Predicts two 0.25 percentage point hikes, in February and May 2026.
• CBA: Forecasts one hike in February 2026.
• Westpac and ANZ: Expect an extended period of rates on hold.

Arguments for a rate increase:

• Inflation remaining above the RBA's 2-3% target band.
• Rising trimmed mean inflation, which increased from 3.2% in November to 3.3% in December.
• A low unemployment rate of 4.1%, providing the RBA flexibility to raise rates without significantly impacting the labor market.
• Concerns that rising inflationary expectations could become entrenched and translate into actual inflation.

Arguments for holding rates steady:

• Stable inflation expectations and moderate wage growth, with no evidence of a wage-price spiral materializing.
• The resilience of the global economy and a rise in the Australian dollar's value, which could help restrain tradables inflation.
• Declining real wages and stalled household income growth, suggesting consumer pullback is already occurring.
• Uncertainty about whether price increases from geopolitical factors are temporary.

Statements from Officials

• Treasurer Jim Chalmers welcomed the rate hold, describing it as a reprieve for mortgage holders, while acknowledging that many households continue to face financial pressure. He noted that Treasury expects upward pressure on prices from the Middle East conflict to continue.

• RBA Deputy Governor Andrew Hauser cited the US strike on Venezuela as an example of geopolitical factors affecting economic outlook. He stated that if Venezuela increases its oil output, it could lead to a decrease in global oil prices, potentially benefiting consumers, but clarified that these effects have not yet materialized.

• NAB Chief Economist Sally Auld predicted the hold would be unanimous and that the RBA will remain data-dependent, not ruling out a future hike.

• HSBC Chief Economist Paul Bloxham advised the RBA to maintain vigilance on inflation before considering any rate cuts.

Future RBA Meetings and Schedule

The RBA monetary policy board is scheduled to meet eight times in 2026, with decisions announced at 2:30 PM Sydney time (AEDT/AEST):

A statement from the board accompanies each decision, and the minutes of the meeting are released two weeks later. Governor Michele Bullock conducts a press conference following each decision.

Impact on Home Loans and Savings

Current average interest rates for borrowers include an average variable rate of 5.51% for existing owner-occupiers and an average fixed rate of 5.1% for new owner-occupier loans of three years or less.

A 0.25 percentage point rate hike could increase minimum monthly mortgage repayments by $90 to $150 for loans ranging from $600,000 to $1 million, according to Canstar analysis.

Fixed rates increased in December 2025, with 43 lenders, including three of the four major banks, implementing hikes. Canstar's data insights director, Sally Tindall, stated an expectation that most banks would pass on a full 0.25 percentage point increase to borrowers if the RBA implements a future hike.

Savings rates are less uniform, with the average ongoing savings rate at 3.07%, though higher rates are available through market comparison.

Most major banks expect no rate cut until 2027, with Westpac predicting a further hike.