This research and data was paid for by bheja.ai. If you use it, please cite and link to our client and Primara Research. Thank you.
If the RBA raises rates tomorrow, it will mark one of the most dramatic policy reversals in the central bank's history, hiking just 174 days after cutting in August. Not a single economist (0 of 33 surveyed) predicted rates would rise in early 2026. The catalyst: December's inflation data jumped to 3.8%, shattering hopes of a downward trend. The only faster reversal was in 2001-02 (154 days), when the RBA similarly misjudged how quickly economic conditions would change.
New analysis reveals that if the Reserve Bank of Australia raises rates tomorrow, it would mark the second-fastest policy reversal in the central bank's history, just 174 days after cutting rates in August, a move no economist predicted in November.
The only faster turnaround occurred in 2001-02, when the RBA flipped from cut to hike in 154 days. Then, the RBA cut rates fearing a severe global downturn, only to hike months later stating the economic climate had "changed markedly" and "the outlook no longer warranted" their previous stance. Both reversals share the same pattern: rapidly changing conditions that contradicted the RBA's initial assessment.
Six weeks ago, the RBA Board unanimously voted to hold interest rates at 3.6 per cent. In November, all 33 economists surveyed predicted rates would stay at or below current levels through the first half of 2026. Now, markets are pricing in a 72 per cent chance of a rate hike at tomorrow's meeting.
One month changed everything
The catalyst was December's inflation data, which reversed what appeared to be a hopeful downward trend. Inflation had been above the RBA's 2-3 per cent target for months, but November's 3.4 per cent suggested movement in the right direction. December shattered that confidence, with headline inflation jumping to 3.8 per cent and trimmed mean ticking up from 3.2 per cent to 3.3 per cent.
- 174 days Time from August rate cut to potential February hike (second-fastest reversal in RBA history)
- 154 days Fastest-ever reversal (2001-02), the only time the RBA flipped policy faster
- 72% Market-priced probability of a rate hike at tomorrow's meeting
- 0 of 33 Economists who predicted rates would rise in early 2026 (surveyed in November)
Even the Board didn't see it coming
The December meeting minutes reveal the Board was already concerned about "signs of a more broadly based pick-up in inflation" and acknowledged "the risks to inflation have tilted to the upside." But crucially, they stated "it will take a little longer to assess the persistence of inflationary pressures" and that rate cuts were "yet to flow through fully."
If they hike tomorrow, it suggests even the Board itself underestimated how quickly they'd need to abandon their "wait and see" approach.
The December meeting's unanimous decision is particularly significant. Before the previous rate cut, the Board was split, signalling change was coming. This time, there was no warning.
If the RBA hikes tomorrow, it will be a stunning admission that they got it wrong—badly and quickly. Just six months after cutting rates to support the economy, and six weeks after unanimously voting to hold, the central bank may reverse course in what would be one of the fastest policy backflips in its history. For mortgage holders who enjoyed brief relief from August's cut, a hike would mean higher repayments almost immediately. The broader message is more unsettling: if every economist missed this and even the RBA Board showed no warning signs in December, Australia's inflation battle is far more unpredictable than anyone thought. The fact that December's single month of data, headline inflation jumping from 3.4% to 3.8%, could trigger such a drastic reversal suggests the central bank is now in reactive mode, not the controlled, data-driven approach they've promised. For Australians, this means more volatility ahead, less certainty in financial planning, and a housing market that will struggle to find stable footing.
The RBA's recent policy path reveals a striking pattern of consensus. Over the past five rate decisions - spanning the August 2025 rate cut, three consecutive holds, and this week's rate hike - every vote has been unanimous (9-0). In August, all nine Board members agreed to cut rates to 3.6 per cent. For six months, all nine members were comfortable maintaining that position through three consecutive meetings. Then, in February, all nine members agreed to reverse course, hiking rates to 3.85 per cent. The February statement acknowledged that "private demand is growing more quickly than expected" and "capacity pressures are greater than previously assessed" - language that effectively admits the Board's collective assessment in August proved incorrect. What's notable is not just the policy reversal itself, but that across five consecutive meetings spanning 174 days, not a single Board member has dissented from the majority position. The entire Board moved in lockstep from cut, to hold, to hike - with no internal debate visible in the voting record.
