As we kick off the first full week of 2026, investors buying ASX shares will be tuning into the outlook for interest rates in the year ahead.
That's because interest rate moves, whether higher or lower, tend to have a greater impact on some ASX shares than others.
We'll return to that important investing trend below.
But first…
Is the RBA poised to tighten in 2026?
This time last year, analysts and ASX investors alike were optimistic that inflation was coming down, and that Australia would see the Reserve Bank of Australia enter a lengthy easing period.
Today, however, that view appears to have been overly rosy.
The latter months of 2025 saw inflation move higher, rather than lower, with core inflation, the RBA's preferred measure, notching up to 3.3%, well above its target range of 2% to 3%.
This saw the RBA keep the official interest rate on hold at 3.60% at its last meeting on 9 December.
"The recent data suggest the risks to inflation have tilted to the upside," the board stated. "The data do suggest some signs of a more broadly based pick-up in inflation, part of which may be persistent and will bear close monitoring."
With sticky inflation in mind, a growing number of economists are forecasting that Australia's central bank will have no choice but to swing from easing to tightening monetary policy in 2026.
In a poll conducted by The Australian Financial Review, 17 of the 38 surveyed economists said they expect the RBA to hike rates at least twice in the next 18 months.
And seven of the 38 economists, including those at the Commonwealth Bank of Australia (ASX: CBA) and National Australia Bank Ltd (ASX: NAB), said they expect to see the central bank boost interest rates at its upcoming meeting on 3 February.
Jonathan Kearns, chief economist at Challenger, is among those expecting the central bank to raise rates at its next policy meeting.
According to Kearns (quoted by the AFR):
Inflation pressures will make the board uncomfortable, and it is increasingly apparent that financial conditions are not that tight, given low credit spreads and easy borrowing conditions.
Coming in on the hawkish side, Judo Capital Holdings Ltd (ASX: JDO)'s Warren Hogan added, "We expect the RBA to increase the cash rate by 40 basis points in February, followed by a 25 basis points increase at each of their next two meetings."
Though if you're buying ASX shares, take note that opinions remain divided on the prospect of higher interest rates in 2026.
Tim Toohey, the head of strategy at Yarra Capital, said "statistical quirks" and temporary government subsidies are muddying the waters and making it appear inflation is more resilient than it really is.
"We believe the next move for the RBA will be a cut," Toohey said.
Buying ASX shares amid shifting interest rates
With the odds of higher interest rates in 2026 increasing, though far from certain, investors buying ASX shares should keep in mind that companies with high debt levels tend to suffer if the RBA hikes rates, while these stocks could outperform if rates end up below market expectations.
Higher rates also tend to hamper consumer discretionary stocks as well as growth stocks. A lot of ASX tech stocks, for example, are priced with future earnings in mind.
Real estate stocks also tend to be sensitive to cash rate moves, with higher rates likely to throw up headwinds for ASX REITs.
If the RBA does boost interest rates in 2026, as the economists at CBA, NAB, and Judo forecast, then consumer staples stocks should perform well. ASX bank shares could also benefit from higher rates, as this should help boost their net interest margin (NIM).
