CPI lifts again, cash rate hike a done deal
28 Jan 2026
An unwelcome rise in both monthly and quarterly inflation is set to force the RBA into delivering a rate hike at its first meeting in 2026 next week.
Australia’s CPI results, released today from the ABS, saw headline inflation rise to an annual rate of 3.8% in the monthly dataset (original data), while trimmed mean inflation rose to 3.3%.
The quarterly results, which continue to be the RBA’s preferred dataset for now, saw trimmed mean inflation rise from an annual rate of 3.0% in the previous quarter to 3.4% in the December quarter.
This is above the RBA’s forecast for trimmed mean inflation for the December quarter of 3.2%, putting a February rate hike firmly on the table.
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| ABS Quarterly CPI – annual movement | |
|---|---|
| Quarter | Trimmed mean |
| Dec-24 | 3.3% |
| Mar-25 | 3.0% |
| Jun-25 | 2.7% |
| Sep-25 | 3.0% |
| Dec-25 | 3.4% |
Source: ABS CPI Appendix 1, seasonally adjusted data.
Impact of a rate hike in February
Should the RBA announce a hike to the cash rate to 3.85% next Tuesday (3 February), an owner-occupier with a $600,000 mortgage and 25 years remaining would see their minimum monthly repayments rise by $90, assuming banks pass it on to their variable customers.
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| Impact of an RBA hike in February on minimum monthly repayments | ||
|---|---|---|
| Loan size | 0.25% point hike | New repayment |
| $600,000 | +$90 | $3,782 |
| $750,000 | +$112 | $4,727 |
| $1 million | +$150 | $6,303 |
Source: Canstar. Notes: based on an owner-occupier paying principal and interest with 25 years remaining in Feb 2026 at the RBA average existing customer variable rate. Calculations assume banks pass on each hike in full to existing variable customers the month after.
Westpac and ANZ shift rate call to a hike in February
Westpac and ANZ have already revised their cash rate forecasts on the back of today’s inflation data. Both now expect a 0.25 percentage point rate hike next week, joining CBA and NAB. NAB is the only one out of the big bank economic teams predicting a second hike in May.
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| Current big four bank cash rate forecasts | ||
|---|---|---|
| Bank | Forecast | Cash rate at end of 2026 |
| CBA | 1 x 0.25 in Feb | 3.85% |
| Westpac | 1 x 0.25 in Feb | 3.85% |
| NAB | 2 x 0.25 in Feb, May | 4.10% |
| ANZ | 1 x 0.25 in Feb | 3.85% |
Most variable borrowers ahead on repayments
A rate hike next Tuesday will be a cruel twist for borrowers, many of which were hoping for at least one more cut in this cycle. However, many borrowers are ahead on their repayments, cushioning them somewhat against a potential rate rise.
Data from NAB shows that 80% of its variable borrowers kept their monthly repayments the same after each of the three rate hikes in 2025, which saw them pay extra into their mortgage.
CBA data also showed that the vast majority of its variable borrowers kept their repayments the same after each rate hike.
Canstar’s data insights director, Sally Tindall says, “With inflation running hotter than expected, the RBA has little choice but to make a U-turn back to rate hikes.”
“We’re now four long years into the battle with inflation and today’s results confirm we’re once again headed in the wrong direction.
“The RBA no longer has the luxury of continuing its ‘wait-and-see’ strategy if it’s serious about getting the inflation job done.
“For someone with a $600,000 mortgage and 25 years remaining, a rate hike would see their minimum repayments jump by $90 a month. It’s a bitter pill for borrowers to swallow, particularly when just five months ago there was a chance we’d see at least one, if not two more cuts.
“Thankfully, many borrowers are in a good position to take a hike on the chin, having kept their monthly repayments the same after the three cuts in 2025. However, the idea of paying more to the bank in interest and paying less towards knocking down their debt won’t be welcome.
“This cruel twist back to hikes is a stark reminder that borrowers and renters are often asked to do much of the heavy lifting when it comes to reining in inflation.
“For households who needed every opportunity to drop their monthly repayments last year and continue to juggle tight budgets, a return to rate hikes could put them in a rock and a hard place.
“If you’ve got a mortgage, it’s time to start preparing. Understand what your monthly repayments would look like if we saw not just one, but two hikes in quick succession and make sure you can clear this figure.
“Regardless of what your home loan buffer looks like, now’s an opportune time to sense check your variable rate before a rate hike materialises.
“Canstar data shows there are currently over 40 lenders offering at least one variable rate under 5.25 per cent, however, one hike could see the goal posts shift this to the mid-5’s.”
This article was reviewed by our Consumer Editor Meagan Lawrence before it was updated, as part of our fact-checking process.
