ANZ has adjusted its outlook for monetary policy and now expects the Reserve Bank of Australia (RBA) to raise interest rates by 25 basis points at the February 3 policy meeting, taking the cash rate to 3.85%.
The bank points to the fourth-quarter trimmed mean measure of inflation, which reached 3.35% year-over-year and overshot the central bank's November projection of 3.2%. ANZ also notes that the Australian unemployment rate finished 2025 at 4.1%, figures that, in the bank's view, strengthen the case for a near-term policy response.
ANZ characterizes the anticipated February move as a single "insurance" tightening rather than the start of a renewed sequence of hikes. The bank expects this one-off increase to be followed by a brief easing cycle in 2025, consistent with its view of where the cash rate will move over the medium term.
Alongside its rate call, ANZ expects a pronounced softening in a number of economic indicators in the wake of the February adjustment. It specifically forecasts deterioration in auction clearance rates, consumer sentiment, and business conditions, suggesting a broad-based slowdown in activity measures tied to housing markets, household confidence, and commercial performance.
Despite the run-up in inflation through the second half of 2025, ANZ's analysis indicates that most inflation gauges will trend down and return to the RBA's target range over 2026 and into 2027. That expected moderation underpins the bank's assessment that further tightening beyond the February increase is unlikely.
In summary, ANZ's updated forecast centers on a 25-basis-point rise to 3.85% on February 3, driven by higher-than-expected trimmed mean inflation and a 4.1% unemployment rate at the end of 2025. The bank frames the move as an insurance measure, anticipates a subsequent weakening in housing-market signals, consumer confidence, and business conditions, and sees inflation easing back toward the central bank's target across 2026 and 2027.