RBA increases cash rate to 3.85%

The Reserve Bank of Australia (RBA) increased the cash rate by 25 basis points to 3.85% at its first meeting for 2026. Read the full statement here.

The move comes amid signs that inflation may be proving more persistent than previously hoped. Annual trimmed mean inflation rose to 3.3% in December 2025, after easing to 3.2% in November, according to the Australian Bureau of Statistics, reinforcing concerns that underlying price pressures remain.

Minutes from the RBA’s December 2025 meeting showed the board was increasingly focused on the risk that inflation could become entrenched, particularly if strong labour market conditions, rising unit labour costs and excess demand persisted.

Today’s decision suggests the board judged a modest tightening was necessary to reinforce progress on inflation and ensure demand returns to balance with supply.

If today’s increase has you thinking about repayments, refinancing or adjusting your plans, now is a good time to review your options. I’m here to help you understand what the change could mean for you.