RBA interest rates: Commonwealth Bank tips ‘fine-tuning’ February rate hike

Aussie borrowers have been warned to prepare for an interest rate hike as soon as February by two major banks, with an improving economy and simmering inflation.

Both Commonwealth Bank and NAB on Tuesday tipped the Reserve Bank would move at the first meeting of 2026, lifting the official cash rate by 25 points to 3.85 per cent.

That would add $90 each month to a $600,000 loan with 25 years remaining, according to Canstar.

Commonwealth Bank’s Belinda Allen said lifting rates would be necessary to ensure inflation comes under control.

“But we don’t expect a large hiking cycle, only fine tuning by the RBA, and see the cash rate sitting at 3.85 per cent at the end of 2026,” she said.

It’s a major call for Australia’s biggest lender, which has since the pandemic largely had softer forecasts on interest rates than most other observers.

“Australia has ended 2025 in a cyclical upswing,” CBA’s Ms Allen said.

“We expect (economic) growth will finish the year at 2.3 per cent, up from just 1.3 per cent at the end of 2024.”

Yet progress fighting inflation had effectively stalled and the RBA’s preferred measure of prices — trimmed mean — would effectively finish the year unchanged at 3.3 per cent, she said.

“The improvement in growth has been driven primarily by households,” Ms Allen said.

“Consumer spending has strengthened, supported by a sharp turnaround in real disposable incomes.

“The earlier easing in inflation, Stage 3 tax cuts and a modest loosening in monetary policy have underpinned this increase in incomes.”

Also on the way up was private investment thanks partly to a data centre boom and home building.

Adding to the case for the RBA to move was the tight jobs market, rising growth and a lack of capacity to absorb increasing demand, CBA reckoned.

It comes after RBA governor Michele Bullock turned up the heat after last week’s meeting with tough-talking comments designed to rein in inflation expectations.

Financial markets expect a one-in-four chance of a February rate rise.

NAB’s prediction was even worse news for borrowers with the big bank tipping hikes in February and May.

“The economy is already at trend growth, and private final demand is running stronger than the RBA anticipated,” chief economist Sally Auld said.

That’s based on the bank’s fresh inflation forecasts which suggest the consumer price picture will get worse in the final months of 2025.

“By acting early, the RBA will maximise its chances of executing a modest recalibration of policy that returns inflation onto the appropriate trajectory, keeps growth close to trend and the labour market close to full employment,” she said.

“Pre-emptive action should also minimise the amount of tightening needed and allow scope for a gradual return to more neutral policy settings in the mid-to-late 2027, where we have pencilled in 50 points of cuts taking the cash rate back to 3.6 per cent by the end of the year.”