Commonwealth Bank has held firm on its February rate hike prediction, arguing that softer wage growth is not enough to deter the Reserve Bank.
Fresh data shows annual wage growth dipped to 3.1 per cent in November, according to Commonwealth Bank’s new monthly employment report.
‘We continue to see a February 2026 rate hike as the most likely scenario. Thereafter, we expect the cash rate to remain on hold at 3.85 per cent,’ the report said.
Canstar analysis shows a 0.25-point rate hike would quickly bite, adding roughly $90 a month to repayments on a $600,000 mortgage.
Borrowers with $750,000 loans would pay $112 more, while $1 million mortgages would climb by $150 a month.
Despite the prediction, CBA head of Australian economics Belinda Allen said a lot was dependent on the outcome of the Q4 25 CPI data due on January 28.
‘We’re up against our speed limits, and we continue to think the Reserve Bank will need to do some fine-tuning in 2026,’ Ms Allen told AAP on Tuesday.
‘Based on what they said in December, inflation is too high and we do think, based on the governor’s comments after that December board meeting, the hurdle to hike is probably lower than what we had anticipated.’
Overall, the Australian economy is performing far better than a year ago and has recovered from the difficult pandemic recovery years of 2023 and 2024.
Commonwealth Bank has held firm on its February rate hike prediction, arguing that softer wage growth is not enough to deter the Reserve Bank
‘Households are spending and they’re saving – That’s a very welcome development, and that’s been driven by these very good improvements in household income,’ Ms Allen said.
‘Now the challenge, of course, is inflation hurts all Australians, and I think that’s why the RBA has been so focused on bringing it back down.’
Headline inflation softened in November, falling to 3.4 per cent from 3.8 per cent the month before, though economists cautionit remains too high.
‘Inflation is now moving back in the right direction,’ Canstar analysis said.
‘That’s a small win for the RBA, but the reality is trimmed mean inflation has been at or above three per cent for five consecutive months.
‘What this tells us is that the current cash rate setting might not be high enough to bring inflation back down to its target of 2.5 per cent.
‘If the RBA decides to lift the cash rate as soon as February and banks pass on the increase in full, many variable rate borrowers would see higher repayments flow through in the weeks that follow.
‘The possibility of a rate hike is still very much a live one and borrowers should take the time to get ahead of the game while they can.
‘Work out what your repayments would look like if the cash rate rises and make sure your budget can handle it.’
