Introduction to Interest Rates in Australia
The Reserve Bank of Australia (RBA) is set to meet for the first time in 2026, and interest rate watchers are eagerly waiting to see what the new year will bring. The RBA’s outlook for interest rates underwent a significant shift at the end of 2025, with talk of further rate cuts moving to discussions of an extended pause and potential rate hikes.
The RBA’s Stance on Interest Rates
In her final remarks of 2025, RBA governor Michele Bullock laid the cards on the table, stating that she didn’t see rate cuts "on the horizon for the foreseeable future" and noted that an extended hold or a rate rise were the options the board would be considering. This shift in stance has led to high-profile economists reevaluating their forecasts, with some predicting rate hikes as early as February 2026.
Upcoming Economic Data
This week will bring a crucial piece of economic data for the RBA and those betting on the trajectory of rates: the consumer price index (CPI) will be released on Wednesday by the Bureau of Statistics. While the RBA has cautioned against reading too much into a single data release, this first inflation reading of the year will help set the tone for future interest rate decisions.
When is the Next Reserve Bank Meeting?
The first RBA monetary policy board meeting of the year will kick off on Monday, February 2, and conclude on Tuesday, February 3, with the interest rate decision announced at 2:30pm AEDT. The cash rate currently sits at 3.6 per cent, where it has been since the RBA delivered its last rate cut in August 2025.
Will There Be a Rate Hike or a Rate Cut?
It’s difficult to speculate with confidence, but based on current market pricing, the answer is no change to rates next month. According to data from Bloomberg, there’s around a 34 per cent chance of a hike in February, with the market seeing the cash rate remaining steady at 3.6 per cent as the most likely outcome. By June, market pricing puts the chance of a rate hike at 93 per cent, and by August, a 0.25 percentage point hike is fully priced in.
What Data is the RBA Watching?
Inflation is the main game for the RBA, as maintaining price stability is central to its mandate, alongside full employment. The central bank targets consumer price inflation between 2 and 3 per cent and uses data released by the ABS to track its progress. The RBA will be watching incoming inflation data to determine if inflation pressures are persistent or temporary.
RBA Monetary Policy Board Meetings in 2026
The RBA’s interest-rate-setting monetary policy board meets eight times a year, with meetings starting on a Monday afternoon and concluding on a Tuesday afternoon. The board’s cash rate decision is released at 2:30pm Sydney time (currently, AEDT). In 2026, its decisions are scheduled for: February 3, March 17, May 5, June 16, August 11, September 29, November 3, and December 8.
Impact on Home Loan and Savings Rates
The RBA’s moves are of major interest to Australian households, as they affect what we are charged to borrow money or earn on our savings. A 0.25 percentage point rate hike would increase existing borrowers’ minimum monthly mortgage repayments, with estimates ranging from $90 to $150 a month for loans between $600,000 to $1 million. Meanwhile, fixed rates have been on the way up, with 43 lenders hiking at least one fixed rate in December.
Conclusion
In conclusion, the RBA’s first meeting of the year is just around the corner, and interest rate watchers are eagerly waiting to see what the new year will bring. With the possibility of rate hikes on the horizon, it’s essential for Australian households to stay informed about the latest developments in the economy and how they may impact their financial situation. By understanding the RBA’s stance on interest rates and the upcoming economic data, households can make informed decisions about their mortgages and savings.
