The S&P/ASX 200 fell 0.4% to close at 8,599 on Tuesday, following brief gains earlier in the session as market sentiment turned subdued amid growing fears of a rate hike as soon as February. Commonwealth Bank of Australia and National Australia Bank now anticipate that the Reserve Bank could begin tightening policy earlier than previously expected, citing persistent inflation pressures in a capacity-constrained economy. The forecasts came after the central bank left the cash rate unchanged at its final policy meeting of 2025, while delivering a hawkish stance. Swaps now imply a 28% chance of a February hike, nearly 41% for March, and August almost fully priced in. Two of the major banks closed lower, particularly Westpac (-1.1%) and ANZ (-0.4%). Adding to the cautious mood, the Westpac–Melbourne Institute Consumer Sentiment Index slumped by 9% month-on-month to 94.5 in December, slipping back below the 100 threshold after briefly returning to positive territory in November.
