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Right now, the dominant narrative says the Reserve Bank is gearing up for another rate hike in February. Economists are lining up behind it, while headlines are warming up. Some banks have even started nudging term deposit rates higher, acting as if a hike is already a done deal. I don’t buy it.
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Yes, inflation is still too high and remains stubborn, but the idea that the RBA is about to pull the trigger misrepresents how they make decisions and how the data is evolving beneath the surface.
The RBA doesn’t react to one noisy CPI print or a scary headline. It breaks inflation down, strips out the extremes, and focuses on momentum.
That’s why trimmed mean inflation, services inflation, and persistence matter far more than whether a single component spikes in one month. When you look at CPI through that lens, the story becomes far less dramatic.
Goods inflation continues to cool, imported price pressures are easing, and retail discounting is becoming more visible. Fuel prices also softened leading into December, and the Australian dollar has remained relatively stable. These forces are all working in the same direction.
Housing and services remain the pressure points. Rents are still rising, but interestingly, the most recent monthly CPI Indicator report published by the Australian Bureau of Statistics shows services like insurance, health, and education are all pointing down and lower than they were in April last year.
Put this all together, and inflation is likely to edge lower again. While it’s not enough to celebrate or justify a cut, it’s enough to justify being patient.
That’s why a February hike looks unlikely. The Reserve Bank already knows inflation is sticky, and another reminder doesn’t change the playbook. Keeping rates on hold maintains a restrictive policy stance without risking unnecessary harm to households or the labour market.
The more interesting twist is what the banks are doing. By lifting term deposit rates early, they’re positioning for a hike that hasn’t happened yet. That may prove premature. While banks don’t like being behind the curve, they don’t set monetary policy. So, if the RBA holds, those higher deposit rates may look less like foresight and more like a competitive grab for funding.
For everyday Australians, the takeaway is simple. Panic decisions rarely pay off. Locking in assumptions on bank forecasts can backfire, especially when the underlying data shows inflation cooling slowly, not reigniting. The RBA wants confirmation, not chaos and right now; numbers support waiting.
For now, good luck and good trading.
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Dale Gillham is Chief Analyst at Wealth Within and an international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in bookstores and online at www.wealthwithin.com.au.
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