Mortgage holders have been dealt a fresh blow, as another major Australian bank scraps the idea of interest rate cuts in the foreseeable future after inflation shot up.
ANZ’s head of Australian economics Adam Boyton said inflation’s rise to 3.8 per cent in the 12 months to October effectively killed its previous forecast of rate relief in February.
“We no longer see one final rate cut from the RBA in the first half of 2026, given recent inflation pressures,” Mr Boyton said.
He said the case for further rate cuts was “less clear” as the nation’s capacity for growth was around its potential limit.
Mr Boyton also stressed that it was unlikely the RBA would hike rates in 2026 as the unemployment rate is expected to rise, and labour market set to remain “balanced” instead of tight.
“And we don’t expect Q3’s lift in inflation to be permanent,” he said.
“As a result, we expect the RBA to be on an extended hold, with the cash rate to remain at its current level of 3.60 per cent.”
While Mr Boyton ruled out a hike, some economists have argued lifting the cash rate will be necessary to stamping out this resurging inflation.
EQ Economics managing director Warren Hogan said the next move would be a hike and predicted the change would arrive mid-next year.
“The market’s not going to price in a rate hike until it’s imminent,” he told Business Now.
“I think we’re more than likely going to be talking about rate hikes by the time we get back from the summer holidays.
“I think May is when you get the first opportunity for a rate hike. The sooner they do it, the less they have to do.”
Commonwealth Bank of Australia and NAB also expect the RBA to stay on hold next year.
Westpac is the only remaining bank forecasting a cut and said the central bank will first slash the cash rate by 0.25 per cent in May before cutting again in September.
The major bank forecasts the cash rate will remain at 3.1 per cent until December 2027.
Money markets say there is a 96 per cent chance rates will stay on hold at the RBA’s December 9 meeting while there is a four per cent chance of a cut.
The recent figures revealed annual inflation lifted from 3.6 per cent in September to 3.8 per cent in October; rising further outside the RBA’s two to three per cent target band.