February 2026
The Reserve Bank of Australia (RBA) Board decided to increase the cash rate by 0.25% to 3.85% at its February meeting.
The move was in line with expectations given continued upward inflation pressure and follows no change at the last three meetings, with the last move (a cut) back in August 2025.
The move sends a clear message to policymakers that adjustments are required to correct a demand (spending) / supply (productivity) imbalance.
Key changes from the December statement were as follows:
- Significantly more hawkish inflation references in their commentary and that they now believe inflation is likely to remain above target for some time
- Citing their uncertainty whether financial conditions (rate settings), which were eased of 2025, now remain restrictive
- Specific reference to credit being readily available to both households and businesses (a shot at the banks for ramp up in lending)
- The labour market has remained stronger than they expected
- Recent growth and trade in Australia’s major trading partners have surprised on the upside
Whilst the Board remain convinced that some of the pick-up in inflation reflects temporary factors, capacity pressures (demand outstripping supply) is greater than they previously expected.
The statement noted that today’s decision was unanimous. Interesting given the RBA up until recently had one more rate cut pencilled in for 2026.
Following the announcement, Australian government bond yields rose (prices lower), the AUD/USD rose (breaking above US70c), and Australian equities moved lower.
Written by Christopher Lioutas
Chairman – Harbourside Investment Management
