Three of Australia’s four largest banks now expect the Reserve Bank of Australia (RBA) to raise interest rates again before the end of 2026, following a stronger-than-anticipated inflation reading that tempered hopes of rapid disinflation.
Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Australia and New Zealand Banking Group (ANZ) have each adjusted their forecasts to include an additional rate hike this year. The shift comes after July’s consumer price index rose 3.8% year-on-year, exceeding market expectations and reigniting concerns over persistent domestic price pressures.
NAB now anticipates an immediate increase at the RBA’s September 29–30 policy meeting, with risks tilted toward a second hike in November if economic momentum remains robust. CBA and ANZ, however, expect the next move to occur in November, aligning with their prior projections. Westpac remains an outlier, maintaining its view that rates will remain unchanged through year-end.
Market pricing reflects the growing conviction in tighter policy, with a 50% probability of a September hike now assigned to the RBA’s cash rate, up from 17% before the inflation data. Traders are pricing a total tightening of 30 basis points by February 2027, with the cash rate potentially peaking near 4.6%.
CBA’s head of Australian economics, Belinda Allen, cautioned against overinterpreting a single monthly inflation print but noted that broad-based price pressures suggest the disinflation trend has stalled. She added that recent RBA communications indicate the central bank would likely respond to the upside inflation surprise with a rate increase in November, though an earlier move in September remains a material risk.
The RBA has held its benchmark rate at 4.35% for two consecutive meetings after implementing three increases earlier in 2026. The central bank’s next decision will be closely watched for signals on whether policy needs to tighten further to ensure inflation returns to target within the prescribed timeframe.
