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Just a few months ago, the Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), Australia and New Zealand Banking Group (ANZ), and Westpac had all been forecasting a hold for the rest of the year followed by a gradual easing. Brokers were hoping for what could have been a “period of stability”.
Instead, following a higher-than-target underlying inflation reading of 3.6 per cent in July, all major banks are now forecasting a 0.25-percentage-point hike at the Reserve Bank of Australia’s (RBA) 28–29 September meeting, with ANZ calling a second hike of the same size in November.
ASX market expectations have also put the chance of a cash rate increase to 4.6 per cent in September at 82 per cent.
Many banks have already started moving their fixed rates in anticipation of a fourth rate hike for 2026, while brokers have told Broker Daily how just the spectre of tightening monetary policy is enough to knock buyer confidence, partially among those entering the market for the first time.
Broker Daily has previously reported on the speed at which each lender hands down a rate hike to its borrowers versus a rate cut.
The revised forecasts follow increasingly hawkish commentary from the RBA, with governor Michele Bullock telling Parliament last week that some of the upside risks to inflation had begun to materialise.
“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising,” Bullock said.
“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.”
ANZ forecasts double hikes before end of year
ANZ economists Adam Boyton and Jack Chambers have added one 0.25-percentage-point hike to their forecasts, meaning they now see one hike at the next meeting in September followed by a second hike in November.
This would bring the official cash rate to 4.85 per cent, the highest level since 2008.
“The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflationary shock than a growth shock suggests that a single 25bp rate hike in November, after the quarterly Consumer Price Index data are released, is no longer the most likely outcome,” ANZ economists said and noted that they thought the decision would be unlikely to be unanimous.
They added that the RBA’s sentiment over the past week had also hinted that a hike was very much on the table.
“The RBA has also had a range of opportunities over the past week, through its public communications, to pull back expectations of a near-term rate hike,” they said.
“For example, it could have stressed the importance of the quarterly CPI to gauge whether upside inflation risks were materialising.
“To date, it has chosen not to.”
CBA brings forward hike, pushes back cuts
CBA economists have brought forward their forecast for the next rate hike, with the bank now expecting the RBA to lift the official cash rate by 0.25 percentage points at its September meeting.
The move would take the cash rate to 4.60 per cent, with CBA currently expecting this to be the peak of the tightening cycle.
CBA head of Australian economics Belinda Allen said a combination of higher oil prices, stronger-than-expected economic data, and increasingly hawkish signals from the RBA had shifted the bank’s expectations.
However, CBA is not currently forecasting a second rate hike, with Allen saying another increase was a clear risk, but not the bank’s base case.
“The economy is slowing, the labour market is moving closer to balance and the housing market is undergoing a significant downturn. A cash rate of 4.60 per cent would also leave monetary policy firmly restrictive,” the bank said.
“A strong September-quarter trimmed mean inflation result of 1 per cent or more could nevertheless put another increase on the table.”
Looking further ahead, CBA continues to forecast 50 basis points of rate cuts in 2027, although it has pushed back the timing of the first reduction from May to August 2027, followed by a second cut in November.
Westpac brings forecast forward
Westpac economists have brought forward their forecast for the next RBA rate hike, with chief economist Luci Ellis now expecting a 25-bp increase at the September meeting rather than November.
The bank said increasingly hawkish RBA communication had shifted the timing of its call, particularly after Bullock said upside risks to inflation appeared to be materialising.
Ellis said: “As we highlighted, ‘if the internal members felt the situation was more urgent and wanted to get the hike done in September, we believe they could muster a majority of Monetary Policy Board votes in favour.’
“Recent rhetoric shows that they will try.”
While Ellis said that the decision would likely be split, she too flagged the risk of a follow-up hike.
“Much depends on the data flow after the meeting. We have not adjusted our view of the timing of eventual rate cuts (currently pencilled in as starting August 2027) but would need to do so if a follow-up hike comes into the base case,” Ellis said.
NAB remains fixed on September hike
NAB economists Sally Auld, Gareth Spence, and Taylor Nugent moved their forecast for the next RBA rate hike to September almost a month ago, following stronger-than-expected inflation data.
The bank said July CPI showed inflation running hotter than the RBA had expected, while recent communication from the central bank had repeatedly indicated that further tightening would follow if upside inflation risks materialised.
NAB said the latest data had effectively crystallised those risks and that therefore a rate hike to 4.6 per cent was now the most likely outcome.
“Having opted against the argument that tightening policy pre-emptively could be appropriate to manage upside risks in August, the Board may now feel a sense of urgency,” NAB said.
“The RBA were wrong-footed last year by a resurgence in inflation, and this has left them with little or no flexibility with respect to inflation outcomes.”
Rate volatility the 'new normal'?
The Finance Brokers Association of Australia (FBAA) said that the renewed omen of a rate hike could spell the beginning of "a new era of ongoing rate volatility."
FBAA CEO Leo Gagic said, however, that such difficulties would make brokers even more relevant, as market share hits 81.6 per cent.
“Consumers are increasingly looking for guidance, not just transactions,” said Gagic.
“Brokers who communicate regularly, explain market developments, provide clear insights, and help their clients understand options will build stronger and lasting relationships and loyalty."
[Related: Young borrowers increasingly face mortgage-retirement gap]
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