Dynamic Business | February Rate Hike Now 73% Likely After Hot Inflation Data Stuns Markets

Yajush Gupta reports on the immediate market reaction to Australia's December quarter inflation data and what it means for property markets and mortgage holders, published by Dynamic Business.

The ABS confirmed the Consumer Price Index rose to 3.8 per cent annually in December, up from 3.4 per cent in November and above market forecasts of 3.5 per cent, while the trimmed mean edged higher to 3.3 per cent. All four major Australian banks moved swiftly to forecast a 0.25 percentage point rate rise at the RBA's February meeting, which would take the cash rate to 3.85 per cent — the first increase since November 2023. For mortgage holders, the increase would add approximately $90 per month on a $600,000 loan and $150 per month on a $1 million loan.

Oliver Hume chief economist Matt Bell said that with the trimmed mean coming in above market expectations and no further significant data due before the RBA's decision, a February hike was now effectively locked in. Bell described the easing cycle as one of the shallowest in more than 30 years, noting that the pivot from expected rate cuts to rate hikes had happened rapidly across the second half of 2025. He warned that the sentiment impact on property markets would be immediate, with the anticipated boost to buyer confidence failing to materialise as expected.

Despite the near-term headwinds, Bell pointed to positive underlying conditions — including stronger-than-expected consumer spending, a tight labour market and stabilising population growth — as reasons for continued confidence in the 2026 property outlook. He noted that mortgage holders are still operating with rates 0.5 per cent lower than at the same point last year, and that the full effect of 2025's rate cuts continues to filter through the economy.

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