What to expect from the RBA in February 2026

Inflation is back in the spotlight—and for many Australians, that means renewed anxiety about interest rates and household budgets. After prices rose faster than expected late last year, hopes of a rate cut in 2026 have all but faded. Australia’s big four banks have revised their forecasts around the national cash rate, with leading economists now leaning towards the RBA raising the rate this year. However, this economic ‘blunt instrument’ runs the risk of putting extra pressure on Australian borrowers.

Adjusting the nation’s cash rate is one of the main ways for the RBA to accomplish this goal, as the cash rate influences Australia’s interest rates. Raising rates can help slow down an economy that threatens to run too hot by making it more expensive to borrow money.
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What was once expected to be a year of rate cuts is now shaping up as a potential return to tightening, as the Reserve Bank faces mounting pressure to bring inflation back under control. The result is a more fragile economic outlook—and the growing prospect of higher repayments for millions of borrowers.

RBA Governor doesn’t see rate cuts on the horizon, remains focused on the data

Speaking following the previous RBA Monetary Policy Board (MPB) meeting in December 2025, RBA governor Michele Bullock said that the decision to keep the rate on hold could be partially attributed to inflation figures being higher than expected. With the ABS switching from quarterly to monthly inflation release, the RBA board decided it needed to be cautious before relying too much on this data.

“Before the next meeting we will receive more data on the labour market and inflation, including quarterly trimmed mean. These will be important inputs into our updated forecasts and for the Board’s deliberations in February.”

The governor reiterated that the RBA’s focus is to return inflation to target and to keep it low and stable, while maintaining a low unemployment rate and sustainable employment growth.

When asked about whether a potential rate rise could be on the cards for February 2026, the governor said that the MPB would be guided by the data:

“If inflation continues to be persistent and looks like it is not coming back down towards the Board’s target, then I think that does raise questions about how tight financial conditions are and the Board might have to consider whether or not it’s appropriate to keep interest rates where they are or in fact at some point raise them. But I wouldn’t put a timing on that. It’s going to be a meeting-by-meeting decision.”

“I would say at this moment that given what’s happening with underlying momentum in the economy that it does look like additional cuts are not needed.”

“I don’t think there are interest rate cuts on the horizon for the foreseeable future. The question is, is it just an extended hold from here or is it a possibility of a rate rise? I couldn’t put a probability on those but I think they’re the two things that the Board will be looking closely at coming into the new year.”

ANZ predicts a single hike as insurance

While ANZ’s previous forecasts were for all talk and no action at the February 2026 RBA meeting, the recent inflation figures have seen the bank change its tune. Now, ANZ economists are forecasting a 25-point rate hike in February 2026, followed by an extended hold.

ANZ head of Australian economics, Adam Boynton, predicted that the February hike would be a single ‘insurance’ tightening, rather than the start of a new hiking cycle:

“In the wake of an interest rate increase we would anticipate material softening in leading indicators of activity such as auction clearance rates, consumer sentiment and business conditions/confidence. That will weaken the activity case for further rate rises beyond the one we expect. And while price pressures lifted through the second half of 2025, most top-down inflation indicators continue to suggest that a moderation of inflation back into the target range is likely over 2026 and into 2027.”

Commonwealth Bank predicts a hike, but it’s not a done deal

Economists from Commonwealth Bank were already forecasting a February 2026 rate hike, feeling that the previous round of inflation data contained some “mixed signals”. The most recent inflation data has not changed their minds, though there is still a “case for the RBA sitting on its hands”. For example, the RBA could choose to “rely on tighter financial conditions to do the heavy lifting for them” and take a “wait and see” approach to inflation in the face of global geopolitical uncertainty.

“We are still of the view that the economy only needs some fine tuning in the form of one rate hike.The detail of the inflation data also supports this view. Persistent inflation remains too high but is not accelerating further. A rate hike in February should be enough to see inflation settle back close to target by the end of the forecast horizon. The risk clearly sits with an additional rate hike given the early signs of the labour market tightening and the tail wind from the consumer.Australia may already be breaching its speed limit, capacity is limited and the risk remains of further tightening in monetary policy.”

Commonwealth Bank is also forecasting that trimmed mean inflation will be at or near the RBA’s target by the end of 2027.

NAB says the RBA just needs to tap the brakes

NAB is forecasting not just a hike in February 2026, but May 2026 as well, which would bring the cash rate to 4.10%. That said, on the Morning Call podcast NAB group chief economist, Sally Auld, said that “our view all along has been this is not the start of a new tightening cycle; it’s just a modest recalibration of policy.”

“We should bear in mind as the Deputy Governor said earlier this year, it’s not just about the inflation numbers. The bank’s reaction function is not just a mechanical response to where inflation prints, but they will step back and take a look at the bigger picture… Clearly inflation has been running stronger than they expected in the back half of last year, but also growth has been running stronger than expected too.”

Westpac says RBA to hike, then wait and see

Westpac also updated its forecast immediately following the release of the December 2025 inflation data, and is now predicting a single rate hike in February 2026 followed by an extended pause. That said, the RBA MPB is still expected to “debate the merits of holding versus raising the cash rate at the meeting,” and Westpac is not assuming that “a sequence of back-to-back hikes” is coming:

“An increase in the cash rate next week will put policy in an unambiguously restrictive position, a point on which there has been some debate recently. The peak cash rate is only half a point higher than next week’s expected outcome. And with measures of underlying inflation in the bottom half of the 3s, the amount of disinflation needed to get back to the 2½% target midpoint is relatively modest.”

While moderating inflation could see the RBA keep the cash rate on hold for some time, “if inflation remains uncomfortably high in coming quarters, the Board will act again.”

Canstar says a cash rate hike is a done deal

Canstar’s data insights director, Sally Tindall, says that 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.”

Canstar has calculated that 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 customer:

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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.