As the Reserve Bank of Australia’s (RBA) first meeting of 2026 draws closer, market participants are placing bets around expectations for the central bank’s next move on monetary policy.
The RBA cut interest rates three times in 2025, lowering the official cash rate (OCR) to 3.6%. The easing cycle provided some relief to mortgage holders and investors, many of whom have been under pressure amid rising living costs and elevated property prices.
Yet, recent upticks in inflation and relatively low unemployment have reduced the likelihood of further rate cuts in the near term. Instead, some market players are now factoring in the possibility of a rate hike at the upcoming meeting, scheduled for the 2 and 3 of February.
In a two-part series, Australian Broker asks industry participants for their views on current market conditions and their expectations for the RBA’s next policy decision.
Head of commercial at Melbourne-based brokerage My Mortgage Freedom
"In the near term, I expect the RBA to hold the cash rate. Inflation is still above the 2% to 3% target band, which makes it too early to justify cuts, and conditions aren't strong enough to force an immediate hike. Also, price pressures remain persistent, particularly across housing and essentials. The RBA is therefore likely to take a cautious wait-and-see approach and assess more data before making any moves, rather than risk cutting too early or tightening unnecessarily. Overall, the market should see a period of stability rather than stimulus, with the risk still slightly tilted toward higher rates later in 2026 rather than cuts."
Founder and managing director of Adelaide-based brokerage Significant Financial Solutions
"All indications are leaning to an increase of 0.25%, due to inflation figures and the fact that most major lenders have moved their fixed rates accordingly. Unemployment figures would be the only indicator for a hold in rates, and I believe this will not be enough to hold rates.
The markets are very active, construction costs are increasing and grants have inflated market prices. A rate rise could ease the market pressures. But the demand to enter the market will continue to force costs and pricing upwards."
Group chief economist at National Australia Bank (NAB)
"The economy is already at trend growth, and private final demand is running stronger than the RBA anticipated. We now expect the RBA to increase the policy rate by 25 basis points in February. This is likely to be followed by another 25 basis point increase in May, taking the cash rate to 4.1%."
Data insights director at Canstar
"With inflation running hotter than expected, the RBA has little choice but to make a u-turn back to rate hikes. The RBA no longer has the luxury of continuing a wait-and-see strategy if it's serious about getting the inflation job done.
"A rate hike next Tuesday will be a cruel twist for borrowers, many of whom were hoping for at least one more cut in this cycle. However, many borrowers are ahead on their repayments, cushioning them somewhat against a potential rate rise. For someone with a $600,000 mortgage and 25 years remaining, a rate hike would see their minimum repayments jump by $90 a month. It’s a bitter pill for borrowers to swallow, particularly when just five months ago there was a chance we’d see at least one, if not two more cuts."
Sydney-based mortgage broker at Home Loan Village
"I don't think we'll see a decrease. That's pretty certain with what's happening globally. But I think the RBA will probably hold rates steady at this time, maybe increase in May, if they do increase in the next six months.
"[Market momentum] will hold steady if rates hold steady. Over the last six weeks, we've seen expectations of a rate rise really come into the fold. And that's obviously softened the market. I think it's going to come down to the wording of the [RBA's announcement] press release, what [RBA Governor] Michele Bullock actually says, and what kind of interpretation there is. Depending on what she says, I think that will dictate the market more than whether rates stay steady or not. But for now, I think rates will hold."
Founder, director and broker at Perth-based Beez Neez Finance
"Hopefully, they stay on hold. But a lot of banks are increasing their fixed rates. So I wouldn't be surprised if rates go up. But they definitely won't decrease."
Economic director at Compare the Market
"Some banks have provided an early indication of where the cash rate could be headed in the coming months. While everyone has been on summer holidays, most of Australia’s leading lenders have been increasing their interest rates on fixed rate, fixed term home loans. That’s usually an indication that the trend in interest rates is going to be up.”
