Financial market bets for a RBA rate hike likely rose after an above-forecast rise in December inflation

The ABS has reported December inflation rising to 3.8% in December from a year ago.

This is far above the already-high 3.4% rise in November, and even above the expected 3.6% anticipated by a number of market analysts.

And it comes on the top of the strong December labour market data.

It is a combination that will worry the RBA when it meets to review the cash rate target on Tuesday, February 3, 2026.

Financial markets had priced in a 60% chance of a +25 bps rate hike then, but that was before today's CPI result. It won't have reduced after this new data.

The pressure is highest in Brisbane where inflation is now running at 5.2%. Sydney is now at 3.7%, Melbourne is low at 3.1%.

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The housing component of the rise was up +5.5%, with electricity up +21.5%, and rents up +3.9%. The education component was up +5.4% with secondary education up +6.3%.

Over to you, Michelle Bullock.