ANZ expects the RBA to lift rates by 25bp in February, while stressing the move would be framed as cautious and data dependent rather than the start of a tightening cycle.
Summary:
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ANZ expects the RBA to hike rates by 25bp at its February meeting
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Sticky trimmed mean inflation and a tight labour market underpin the call
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ANZ sees the RBA keeping policy guidance flexible and data dependent
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A February hike is not viewed as the start of a sustained tightening cycle
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Updated forecasts are likely to show higher near-term inflation but easing later
ANZ expects the Reserve Bank of Australia to raise the cash rate by 25 basis points at its February policy meeting, citing persistent underlying inflation pressures and a labour market that remains tight despite signs of modest cooling.
The bank points to trimmed mean inflation running at around 3.35% year-on-year in the December quarter, above the RBA’s most recent forecast, as a key factor supporting a rate increase. ANZ also notes that the unemployment rate dipped back to 4.1% late last year, reinforcing the view that labour market conditions continue to exert upward pressure on prices.
However, ANZ does not expect the central bank to signal a committed tightening cycle. Instead, post-meeting communications, including the policy statement, updated forecasts and Governor Michele Bullock’s press conference, are likely to emphasise that the Board remains flexible and is not locked into a predetermined path for interest rates. The February move, in ANZ’s view, would be framed as a risk-management decision rather than the start of a series of hikes.
The bank argues that policymakers will find it difficult to ignore trimmed mean inflation running close to a 4% annualised pace over the second half of 2025, even if updated forecasts show inflation returning to the midpoint of the 2–3% target band over time. ANZ expects those forecasts to reflect a higher assumed path for interest rates and a stronger Australian dollar, both of which would weigh on activity later in the projection horizon.
On growth, ANZ anticipates the RBA will acknowledge improving momentum heading into 2026, supported by a recovery in private demand. Further out, tighter financial conditions and a firmer currency are expected to moderate growth, with unemployment drifting modestly higher from late-2025 levels.
Overall, ANZ expects the RBA to characterise the labour market as still “a little tight” and to justify a February rate increase as a prudent step to ensure inflation returns sustainably to target, while keeping future decisions firmly dependent on incoming data.
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Earlier:
The Reserve Bank of Australia decision today, due at 0330 GMT / 2230 US Eastern time:
RBA cash target
