Economists see "hawkish" signals ahead as inflation resists cooling measures
Australia’s major banks have revised their outlooks for interest rates, signalling that further rate cuts are unlikely in the near term as inflation continues to outpace expectations. Commonwealth Bank, Westpac, NAB, and ANZ have all adjusted forecasts following stronger-than-expected September-quarter inflation data, which saw consumer prices rise 3% year-on-year.
CBA: Inflation surge halts hopes of cuts
Commonwealth Bank of Australia (CBA) economists said the unexpected inflation jump has removed the possibility of any rate cuts in the foreseeable future. CBA expects the Reserve Bank of Australia (RBA) to hold the cash rate at 3.6% through 2025, warning that the “result will be a genuine concern for the RBA".
Belinda Allen (pictured above left), CBA’s head of Australian economics, said the bank anticipates a more “hawkish tone” from the RBA to prevent a resurgence in price growth. Despite unemployment rising to 4.5%, she noted that the labour market remains “slightly tight”, making a rate reduction improbable without a broader cooling in demand.
Westpac: Caution ahead as inflation upsets plans
Westpac chief economist Luci Ellis (pictured above right) said the RBA’s November decision will be to hold rates steady, describing inflation as “too high for the RBA’s comfort". She added that the trimmed mean inflation reading of 3% year-on-year was a “material miss” from forecasts, delaying any move toward easing.
Ellis noted that stronger household spending had brightened the consumption outlook, further reducing the likelihood of a December or early-2026 cut. However, she cautioned that the RBA may “be surprised in 2026 by the gradual softening in the labour market”, potentially creating scope for less restrictive policy later that year.
NAB: Extended hold before gradual easing
National Australia Bank (NAB) maintained its projection that the RBA will hold at 3.6% until at least May 2026, after previously expecting a cut as early as February. NAB’s October Forward View report said that while the economy has shown resilience, higher-than-expected inflation and slower labour conditions leave the RBA “torn between a hold and a hard place".
NAB expects inflation to ease gradually to 2.5% by late 2026, assuming unemployment stabilises below 4.5%. The bank acknowledged, however, that “a rising unemployment rate and a build-up in spare capacity” could bring forward the timing of a rate cut if inflation softens faster than expected.
ANZ: Delayed relief for borrowers
ANZ’s current forecast suggests the next rate cut could occur in February 2026, though this remains under review following the September inflation data. The bank joins NAB in expecting any monetary easing to be delayed until the first half of 2026.
Market data reported by realestate.com.au showed that before the inflation announcement, markets priced in a 100% chance of a February cut. That has now shifted to May, reflecting the consensus among lenders that the RBA’s next move is likely to be much later – or possibly upward – if inflation persists.
Across the major banks, the message is consistent: inflation remains too strong for rate cuts, and policy will likely stay restrictive well into 2026. While economic growth and consumer demand remain stable, rising energy and housing costs are expected to keep pressure on prices.
