Economists at the big four banks have sketched out starkly different cash rate forecasts.
The Commonwealth Bank of Australia’s (CBA) head of Australian economics, Belinda Allen, characterised the June meeting as closely balanced between stubborn inflation and a cooling economy.
“The tone was balanced between inflation remaining too high, but signs of slowing growth as expected. The press conference struck the same tone around the possibility of the need for another rate hike, the data flow from here will decide the path either way,” she said.
“A hawkish tone was maintained on the inflation side of the mandate at the same time growth was acknowledged to be slowing as expected.”
Australia and New Zealand Banking Group’s (ANZ) chief Australian economist, Adam Boyton, read the post‑meeting statement in much the same way: on hold, but with a clear warning that the board was not done tightening if inflation refused to budge.
“We expect that the RBA’s Monetary Policy Board wants to give itself the option of a further rate increase should inflation prove particularly persistent,” he said.
Westpac chief economist Luci Ellis went further, saying that the RBA had deliberately sharpened its language to push back against talk that the tightening cycle had concluded.
“In a move that was less surprising to us than to some in the market, it explicitly signalled that further hikes remain on the table,” Ellis said.
“This drafting decision is unusual for an RBA statement, and a stronger steer than in recent communication. It suggests that the MPB wanted to hose down recent speculation that they are done hiking rates.”
CBA and ANZ pencil in dates for cuts
On the outlook, CBA and ANZ are broadly aligned, with both expecting the central bank to hold rates steady through 2026, before easing the cash rate the following year.
“At this stage we expect the RBA to remain on hold for the remainder of 2026 based on our forecasts for inflation and activity from here,” Allen said.
“But acknowledge the risks in the near term still sit to the upside. We continue to expect two rate cuts in 2027 based on our economic outlook with cuts in May and August 2027.”
Boyton also thinks the next definitive move will be down, but not for some time.
“With broader signs of an economic slowdown and interest rates restrictive, rate cuts are likely to be the next sequence of rate moves,” he said.
“We have pencilled these in for the second half of 2027 (August and November) with the RBA likely to proceed down that path cautiously.”
NAB’s economists on Tuesday (9 June) abandoned their expectation of a further 25‑basis‑point increase in August, recasting 4.35 per cent as the height of the tightening cycle and sketching out a gentler track moving forward.
“We no longer expect the Reserve Bank of Australia to hike by 25basis points in August, and now see the cash rate peaking at the current rate of 4.35 per cent for the cycle,” NAB said.
“The next move in the cash rate is likely to be down, but the timing is uncertain. To highlight shifting risks to the RBA outlook, we have brought forward our expected easing from H2 2027 to Q2 2027 – which now sees the cash rate end 2027 at 3.6 per cent.”
Westpac says borrowers should still expect more pain
Westpac, by contrast, is holding firm to its existing forecast that the RBA will hike the official cash rate at its August and September meetings.
“We retain our view that further cash rate increases are coming. If we are right that the June quarter result for trimmed mean inflation will again be strong, the next hike will come at the August meeting,” Ellis said.
Yet Ellis said that a gentler run of data could prove the bank wrong.
“A longer pause is possible if the next few inflation prints are less alarming, but the direction of travel is still most likely up,” she said.
This article was first published in REB’s sister publication, The Adviser.
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