Why did the RBA lift the cash rate to 3.85%?

The RBA raised the cash rate because inflation is easing too slowly and services prices remain firm. The Board judged demand still needs cooling to bring inflation back to target in a reasonable time. It signalled future moves will depend on data, including quarterly CPI, wages, and domestic spending. If inflation proves sticky, more increases are possible. If demand weakens, the RBA could pause.

How will the rate hike affect mortgage holders in Australia?

Variable mortgage rates are likely to rise as lenders pass on the full move, lifting monthly repayments. Fixed loans rolling off face higher reset rates, so it pays to compare offers, consider offsets, and review budgets. If pressure builds, contact your bank early to discuss hardship options. Making small extra repayments, when possible, can cut interest costs and shorten the loan term.

What does the hike mean for Australian investors?

Rate‑sensitive sectors like REITs and consumer discretionary can face pressure as financing costs rise and spending slows. Banks may see margin support but also rising impairments if unemployment increases. Quality balance sheets and reliable cash flows are key. In fixed income, a blend of short‑duration and investment‑grade duration can balance risks. Keep diversified, add gradually on weakness, and watch CPI and labour data closely.

Global Market Insights

Australia Rates February 04: RBA Hikes to 3.85%, More Tightening Looms

ByDanny Kontos February 4, 2026February 4, 2026

The RBA interest rate hike has lifted Australia’s cash rate to 3.85%, the first increase in more than two years. The Bank signalled it could raise rates again if inflation stays sticky. This has big effects on Australia interest rates, mortgages, and market positioning. We explain why the RBA moved, what it means for households, and how investors can adjust. We also highlight the signals in the latest Statement of Monetary Policy on growth, jobs, and risks into 2027 and 2028.