The Australian sharemarket trimmed earlier gains on Wednesday, as a re-acceleration in inflation in December raised the prospect that the Reserve Bank of Australia will lift interest rates next week to above 70 per cent.

The S&P/ASX 200 index was up 7.20 points, or by 0.1 per cent to 8948.80 at 12.05pm AEDT, after earlier being up by 0.4 per cent to 8978.50. Data showed that the consumer price index rose 3.8 per cent in the 12 months to December last year, compared to the 3.6 per cent forecast by markets.

Money markets have now priced in a greater than 70 per cent chance that the RBA will lift interest rates when it meets next Tuesday. Before the announcement, it was a 60 per cent chance. The likelihood of a rate hike initially saw the dollar spike to a three-year high of US70.20¢, before cooling to last be up by US69.98¢.

“The market has been predicting two rate hikes this year, with the first in May, but at this level of inflation, the first rate hike could be sooner – possibly even at next week’s RBA meeting,” said Russell Chesler, VanEck head of investments and capital markets.

“For the Australian dollar, the inflation backdrop is supportive. Expectations of tighter monetary policy, combined with a softer US dollar and strong commodity prices, have helped lift the $A.”

On the ASX; the interest rate sensitive sector tech sector was the weakest performer. WiseTech Global fell 1.6 per cent, NextDC 1.5 per cent and Life360 by 6.5 per cent.

Energy was the strongest sector – oil futures rose 2 per cent as a US winter storm disrupted crude production and refinery operations. Woodside rose 2.1 per cent following record production in 2025, beating guidance as strong asset reliability offset weaker pricing and softer quarterly output. Santos firmed 1.5 per cent.

Materials were also up as gold further extended gains overnight. Northern Star jumped 3.3 per cent, Regis Resources 0.8 per cent and Evolution Mining 2 per cent. BHP added heavyweight support as it firmed 0.7 per cent, while uranium miner Deep Yellow lifted 5.6 per cent.

Stocks in focus

Market operator ASX Limited edged down 0.1 per cent as it raised its 2026 fiscal year expense growth guidance from 8-11 per cent up to 13-15 per cent, flagging higher spending on risk management and technology upgrades following the ASIC inquiry.

Boss Energy soared 6.8 per cent after it cut its cost guidance after a strong December quarter at its Honeymoon uranium operation, as higher production lifted inventory and supported a solid cash position.

Coronado Global Resources dived 6 per cent as it delivered 2025 fiscal year results within guidance, underpinned by higher production, materially lower costs and the completion of major capital projects, positioning the coal miner for stronger cash generation in FY26.

AUB fell 6 per cent after it completed a $400 million institutional placement announced on Tuesday – a 7.9 per cent discount to the last traded price on January 23.

DroneShield fell 3.4 per cent, as chief executive Oleg Vornik told investors that his decision to sell $50 million of stock in the company last year was partly to cover a tax bill, as well as to secure his financial future.