Major banks have shifted to expect a February rate hike after stronger growth and stubborn inflation raised policy risks.
Australia’s monetary policy debate has sharpened after CBA and NAB signalled the first cash rate hike could land as early as February, aligning with ANZ’s view that the Reserve Bank is now operating “on a knife edge”.
In updated forecasts released on Tuesday, both CBA and NAB said they now expect the RBA to lift the cash rate at its first meeting after the summer break on 2–3 February, reversing earlier expectations that rates would remain on hold.
The shift followed “troubling inflation data, stronger than expected economic growth and a direct warning from the RBA Governor of the possibility of a rate rise”.
NAB is forecasting two hikes, in February and May, while CBA sees one move as sufficient but concedes “there is a chance we could see more”.
The change comes as ANZ Research said the RBA faces unusually balanced conditions entering 2026.
Its quarterly outlook noted GDP growth was running near potential, the cash rate sat around neutral and the labour market appeared “broadly in balance”, shaping an environment in which the next move is uncertain
ANZ expects the cash rate to remain at 3.60 per cent for an “extended period”, but cautioned that if the RBA were to adjust rates in the first half of 2026 then it would “view a hike as much more likely than a cut”.
Canstar data insights director Sally Tindall said, “The RBA governor’s blunt warning last week put the nation formally on notice. Cash rate cuts are now behind us, and what’s in front could well be a rate hike.
“Today, two of Australia’s biggest banks have joined the chorus, both suggesting the first hike could come as soon as February.
“By the time the RBA meets again in February, it will be armed with more data, including two additional monthly inflation prints and another employment report.
“However, if CPI doesn’t start tracking confidently in the right direction, the Board could well be forced to act, particularly if the labour market continues to prove resilient under current interest rate settings.”
ANZ’s assessment also flagged early signs of persistent inflation pressures, even as survey-based cost indicators moderate. Trimmed mean inflation was expected to ease through 2026, though monthly CPI data showed “inflation pressures persisted into Q4 2025”.
With household spending supported by income growth and business investment set to strengthen, ANZ expects the economy to grow by around 2.25 per cent through 2026.
That backdrop, combined with the RBA’s view that the labour market remains tight, reinforced the bank’s judgement that rate cuts are unlikely.
Further out, ANZ described the risks as “more balanced”, with outcomes dependent on global and domestic shocks.
However, for now, the policy conversation has clearly shifted, with major banks increasingly positioning for rate hikes rather than the cuts that had once been anticipated for 2026.
