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With most banks changing their forecasts after underlying inflation remained at 3.6 per cent in July 2026, economists are increasingly asking when, rather than if, rates will rise from their current rate of 4.35 per cent.
National Australia Bank and Macquarie are both forecasting a rate hike as early as September, while Australia New Zealand Banking Group (ANZ), Westpac, and the Commonwealth Bank of Australia are flagging the November meeting as the most likely time for a 0.25-percentage-point hike.
ASX market expectations put the chance of a cash rate increase to 4.6 per cent in September at 82 per cent.
As a consequence, Westpac, NAB, and ANZ have already hiked their fixed rates by as much as 0.2 percentage points in anticipation of the Reserve Bank’s (RBA) meeting. ING and Macquarie made similar moves earlier.
Broker Daily has previously reported on the speed at which each lender hands down a rate hike to its borrowers versus a rate cut.
Broker Daily also previously spoke to brokers about the potential impact of a rate hike, with first home buyers expected to feel the pressure through reduced borrowing capacity and buyer confidence.
Tackling inflation
Speaking to Parliament’s standing committee on economics on Friday (18 September), RBA governor Michele Bullock said that the central bank’s forecasts didn’t expect inflation to return to its target range of 2–3 per cent until late 2027.
“At the time of the August board meeting, we assessed that the risks to that outlook were skewed to the upside,” she said.
“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising. Global cost pressures have increased, the Middle East conflict, the AI boom, and extreme weather events are contributing to upward pressure on a range of energy, agricultural, and technology-related prices.
“It is important that these effects remain contained and do not become embedded into wage and price setting decisions; otherwise, inflation could prove more persistent and require a stronger policy response.”
Bullock also noted that housing conditions had softened, which could pose a “downside risk to economic activity”, but added that given recent growth, many households remained outside of the threat of negative equity.
“Housing prices have fallen in most capital cities, and new housing loans have declined, but these falls follow a period of strong growth. Housing prices are still around 50 per cent higher than they were in early 2020,” Bullock said.
“Despite recent falls in housing prices, the share of borrowers in negative equity remains very limited, and only a small share are facing severe difficulty with their loan repayments.
“I recognise that higher interest rates are difficult for Australians with mortgages who are also facing cost of living pressures, but reducing inflation is essential.”
Treasurer Jim Chalmers said he would not attempt to predict the next RBA rate decision, but acknowledged that the war in the Middle East was forcing central banks around the world to respond to inflation.
“If you look at the interest rate environment around the world, in every single major advanced economy, the market is expecting to see interest rate rises,” he said.
“Interest rates went up yesterday in the US. They went up, I think, last week in Europe, and the markets are expecting multiple interest rate hikes in other countries.”
[Related: Young borrowers increasingly face mortgage-retirement gap]
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