The message from Reserve Bank of Australia governor Michele Bullock on Tuesday was crystal clear: another interest rate rise is still on the cards, but not everyone is convinced. Economists from Goldman Sachs to JPMorgan are doubling down on their bets that the next move on rates will be down, albeit not until next year.
While the RBA held the cash rate steady at 4.35 per cent after its two-day board meeting this week – and Bullock reiterated the central bank’s readiness to tighten monetary policy if required – financial markets and forecasters are sharply divided over the policy outlook.
Traders are pricing in about a 60 per cent chance of a rate increase to 4.6 per cent before Christmas. This chance rises to 76 per cent by the middle of next year, but they have ruled out any chance of a rate cut in 2027.
That follows three rapid-fire rate increases this year as the RBA struggled to contain sticky inflation. While economists acknowledged a fourth interest rate rise was possible this cycle, they said it was unlikely.
“The RBA’s forecasts imply a relatively high hurdle to hike again,” said Bank of America’s head of Australia and New Zealand economics, Nick Stenner. “The most likely case is that they’re done now. There’ll be enough slowing in the economy that they don’t end up increasing rates.”
Source: https://www.afr.com/markets/debt-markets/rba-s-blunt-rate-rise-warning-didn-t-sway-these-economists-20260811-p60nfx