Inflation has risen further above the Reserve Bank of Australia’s 2–3% target. There is now a very real prospect the Reserve Bank will feel it needs to increase interest rates at its meeting next week, with an announcement due on Tuesday afternoon.

Inflation rose 3.8% in the year to December, up from 3.4% in the year to November, according to the latest Australian Bureau of Statistics consumer price index (CPI) report.

The Reserve Bank will look at the data for the December quarter at its February 2-3 meeting.

Financial markets and economists had been leaning towards the possibility of an interest rate rise, as inflation proved stubbornly high in recent months and the jobs market picked up. Today’s inflation data has led markets to regard an interest rate increase as more likely.

Comparing prices in the December quarter of 2025 with the same period in 2024, strong rises were recorded for beef and veal, up 10.7%, reflecting strong overseas demand for Australian red meat.

The ending of rebates saw electricity prices rise 26%, reversing previous sharp declines. The cost of child care was up 11.3%. The prices of some food items, such as pork, poultry, seafoods and cheese, were little changed over the year. So were prices of........

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