Three major banks now expect RBA to hold through 2026 as inflation proves persistent
ANZ has withdrawn its expectation of another Reserve Bank of Australia (RBA) cash rate cut in early 2026, bringing its outlook in line with Commonwealth Bank and NAB, which already anticipated an “extended pause” from the central bank.
In a recent economic note, ANZ revised its projections and no longer expects a final reduction in the first half of 2026, citing stronger-than-expected price pressures.
“We no longer see one final rate cut from the RBA in the first half of 2026, given recent inflation pressures,” said Adam Boyton, head of Australian economics at ANZ. “As a result, we expect the RBA to be on an extended hold, with the cash rate to remain at its current level of 3.6%.”
The bank’s latest outlook leaves Westpac as the only major still forecasting rate cuts next year, with chief economist Luci Ellis maintaining an expectation of two reductions, likely around May and August.
Recent data have reinforced concerns that inflation is not easing quickly enough to justify further policy easing. The Consumer Price Index rose 3.8% in the year to October, up from 3.6% in September and still above the RBA’s 2–3% target band. The trimmed mean measure, which removes many volatile items and is closely watched by the central bank, increased 3.3% over the same period.
Labour market conditions also appear to be softening from earlier peaks. The unemployment rate has edged up to 4.3%, with ANZ judging that the jobs market is now closer to “balanced” than overheated. For the RBA, this presents a tension between its goals of price stability and full employment, with neither inflation nor unemployment moving decisively enough to justify a change in direction.
With inflation “moving in the wrong direction” and unemployment at 4.3%, analysts see little justification for another cut in the near term. The RBA is widely expected to leave the cash rate unchanged at its meeting next week, and some economists now consider that the next move could be an increase rather than a reduction if price pressures persist.
“ANZ has joined a growing cohort of economists who now believe we’ve hit the bottom of the cash rate cycle,” said Sally Tindall, data insights director at Canstar. “While the RBA is unlikely to start hiking rates without plenty of notice, if inflation continues to move in the wrong direction, the next move from the central bank could be up rather than down.”
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