Summary (≈150 words):
The Reserve Bank of Australia (RBA) raised the cash rate by 25bps to 3.85% at its first policy meeting of 2026, marking the first hike since November 2023. The move reverses part of last year’s easing cycle, as inflationary pressures re‑emerged in late 2025 amid strong services costs and a tight labour market.
RBA on rate hike
Annual inflation accelerated to 3.8% in December, while the trimmed mean CPI stood at 3.3%, both above the RBA’s 2–3% target band. The Board stressed its commitment to restoring price stability, noting that policy will remain data‑dependent given the delicate balance between curbing inflation and sustaining growth. Headline inflation is projected to reach 4.2% by mid‑2026, supported by resilient household spending, robust employment, and solid investment. Markets now expect further tightening, with an 80% probability priced in for another hike in May and a total of around 40bps additional increases anticipated this year.
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