SYDNEY, Jan 28, 2026, 17:10 AEDT — The market has closed.
- Westpac slipped 0.2% following fresh inflation numbers that strengthened the case for an RBA rate hike next week.
- Money markets edged higher on the odds of a February move, dragging bank margins and funding costs back into focus.
- The next key event is the Reserve Bank of Australia’s decision on Feb. 3.
Shares of Westpac Banking Corp dipped on Wednesday following Australia’s latest inflation data, which raised bets on a possible interest-rate hike next week.
The stock ended the day 0.23% lower, settling at A$38.87, after swinging between A$38.65 and A$39.15. (Investing)
Timing is key. The Reserve Bank of Australia is set to meet on Feb. 3, and after the core inflation figure came in hotter than expected, markets quickly shifted back toward pricing in a quarter-point hike. That move ripples through the entire bank sector — affecting loan rates, deposit competition, and raising concerns about slower credit growth if borrowing costs remain elevated. (Reuters)
Official figures revealed that annual CPI inflation climbed to 3.8% in December. The “trimmed mean” inflation rate—a core measure that excludes extreme price changes—stood at 3.3% for the year. (Australian Bureau of Statistics)
Westpac’s economists changed their tune. Chief economist Luci Ellis pointed to the “December quarter inflation” as decisive and forecast a rate hike next Tuesday. She also suggested it could be a “one-and-done” move as the most likely scenario. (ABC)
Other major banks held steady near the close. Commonwealth Bank rose 0.19%, ANZ added 0.63%, and NAB showed little movement, based on delayed quotes from Intelligent Investor. (Intelligent Investor)
For investors, the key remains the net interest margin — the gap between what banks make on loans and what they pay out on deposits. A rise in the cash rate can boost that margin, but only if funding costs and competitive pressures don’t erode the gains.
The key question is what the RBA signals, not just its actions. A 25-basis-point hike (one basis point equals 0.01%) carries more weight if the bank signals further tightening or leaves the possibility open.
On the flip side, if rates climb and the economy slows more sharply than anticipated, bad debts could surge and loan growth might stall, wiping out any short-term gains in margins.
The cash session wrapped up, leaving the RBA decision and statement on Feb. 3 as the next clear catalyst. Traders will be focused on whether the central bank presents the move as a one-off insurance measure or signals a more sustained policy shift.
