How have the RBA rate hike odds change after the hot Australian CPI data earlier?
2026-01-28 05:49:00
Prior to the hot Australian CPI data earlier here, the odds of a 25 bps rate hike next week were ~61%. And now after the dust has settled, they have increased to a ~72% probability. It’s not a slam dunk as market players are still reserving some caution just in case the RBA continues to decide to “play it safe”.
That being said, Australia’s “big four” banks are all anticipating a rate hike next week with ANZ and Westpac the latest two to join in on the call after the data today. The ANZ revision can be seen here alongside the views from CBA and NAB. Meanwhile, Westpac is the last to revise their outlook but argues that it might just be a one-off move for now:
“December quarter inflation had the casting vote and voted ‘Yes, hike’. A cash rate increase next week might not necessarily be followed up with a sequence of moves. If inflation remains uncomfortably high in coming quarters, the board will act again. However, further moderation over coming quarterly inflation prints, together with benign reads on the labor market, might see the board wait for some time before moving the cash rate again.”
So far, the RBA hasn’t been explicit that they would outright pivot to a rate hike. In their December meeting, they said that further easing is not likely in the near-term and the next move could very well be a rate hike instead. So, at least in that sense they have kept the door open for a move next week.
If the Australian central bank does deliver on a rate hike next week, they would be the first major central bank this year to do so. And also the first to complete the pivot from an easing cycle to readjusting policy in what has been a stubborn and tough battle against inflation. The ECB and BOE will be watched closely to see if they might be the next ones to follow suit.
