ANZ is changing its tune.
The major bank has updated its forecast for future interest rate cuts.
"We no longer see one final rate cut from the RBA in the first half of 2026, given recent inflation pressures. With growth around potential, the activity case for further easing is also less clear," said Adam Boyton, ANZ's head of Australian economics.
The bank had previously forecasted the Reserve Bank of Australia (RBA) would cut the official cash rate (OCR) once more, sometime in early to mid 2026, bringing rates down to 3.35%.
But the economist pointed out that the nation's relatively low unemployment rate supports the bank’s view that rates will remain on hold, while adding that the inflation pressures seen in the Q3 consumer price index (CPI) are likely temporary.
"As a result, we expect the RBA to be on an extended hold," Boyton said.
The RBA has cut rates three times in 2025: February, May, and most recently in August, with the current rate standing at 3.6%. The central bank has repeatedly made clear that it would not ease rates further until inflation was back within the central bank's target range of 2% to 3%. Market players were unfazed during the bank's next two meetings on monetary policy when the RBA opted to hold rates, citing ongoing inflationary pressures.
The September quarterly CPI showed that both headline inflation and trimmed mean inflationary pressures were rising.
The consumer price index (CPI) rose 1.3% in the three months leading up to September, compared with June's quarterly reading of an increase of just 0.7%. For the year leading up to September, the CPI climbed to 3.2%, up from 2.1% in June.
Meanwhile, the trimmed mean annual inflation rose to 3% in September, up from 2.7% during the June reading.
However, Boyton said: "the lift in trimmed mean inflation in Q3 is likely temporary, but signs of ongoing inflation pressures in the (new) monthly CPI, GDP growth running around the RBA’s estimate of potential and the RBA’s view that the labour market is tight all suggest the RBA’s board is likely to be cautious about further easing."
But rising inflation isn’t just a blow to consumers battling cost-of-living pressures. It also dampens hopes for mortgage holders looking for a break on their monthly repayments.
Luke Ashby, finance specialist and mortgage broker at Brisbane-based Emerge Finance, said even with additional rate cuts — and the potential for a rate hike in 2026 — he doesn't see the market slowing down anytime soon.
"From the first-time homebuyer market, which is a lot of my clients, a lot of them have got the fear of missing out," Ashby told Australian Broker. "There's a lot of demand there given that we've had the recent changes to the 5% deposit scheme with the increases in budget and relaxing of criteria, in terms of income thresholds. There are a lot of first-time homebuyers trying to get in on that scheme now before the prices get too far out of reach and the million-dollar mark is no longer achievable."
The RBA's next meeting on monetary policy is scheduled for 8 and 9 of December.
