CBA, ANZ now see RBA lifting cash rate to 4.85% on November 3
Commonwealth Bank of Australia and ANZ have switched to forecasting a fifth 2026 rate increase from the Reserve Bank of Australia next week, joining Westpac's existing call. Markets are now debating whether a further move follows in February.
Both lenders revised their projections on Wednesday after new inflation readings bolstered the argument for tighter monetary settings. Lifting the cash rate to 4.85% would represent the fifth such increase this year and carry borrowing costs to their highest point since 2008, extending a September move that had already pushed rates to a 15-year peak.
CBA characterized the anticipated rise as a protective measure against inflationary pressures stemming from Middle East tensions, surging worldwide spending on artificial intelligence, and tight domestic economic slack. The lender observed that the central bank’s rhetoric has grown markedly more hawkish compared with its gentler messaging following the September gathering.
ANZ singled out services pricing as the strongest indicator, pointing out that market services inflation is expanding at its quickest annual clip since 2024 — a gauge the RBA monitors closely because it captures domestic demand pressures rather than externally driven costs like oil.
Westpac noted that inflation currently sits above both the RBA’s target and the bank’s own August estimates, with energy-related hazards it had previously identified now beginning to materialize. It anticipates that the majority of Monetary Policy Board members will favor a rate increase, although it observed that RBA Governor Michele Bullock has minimized the significance of a recent uptick in joblessness, contending that core inflation signals a tighter labor market than earlier assumed — a line of reasoning Westpac believes undervalues timing lags and cost pressures unrelated to wages.
Views differ on the path beyond November. Westpac sees an increasing, though still secondary, probability of a subsequent hike in February, whereas CBA anticipates the RBA will pause through both December and February, with rate reductions only becoming plausible in late 2027 should property values soften and joblessness rise.
Events in the Middle East continue to represent a critical wildcard: an intensifying conflict that drives oil prices upward would bolster the argument for additional tightening, whereas a settlement between the United States and Iran reached once the US midterm elections conclude could relieve that pressure. Westpac also highlighted the possibility of an abrupt worldwide downturn — a concern New Zealand’s central bank raised this week — though it noted this risk seems to carry less weight in the RBA’s present assessment.
Why it matters: Confirmation of an RBA rate hike, particularly any indication that keeps a February increase on the table, could lift the Australian dollar and short-term Australian government bond yields, given that markets have already largely priced in the November outcome. A more cautious tone or hints that the tightening cycle is winding down would likely pressure AUD/USD, while oil-price volatility linked to Middle East developments provides an extra channel through which rate expectations could shift.
Source: investingLive