Major banks tip March cash rate hike as RBA decision nears

NAB and Westpac have revised their cash rate forecasts, with both now expecting the Reserve Bank of Australia to lift the cash rate by 0.25 percentage points at its next monetary policy meeting next week, followed by a further increase in May.

If delivered, the move would mark consecutive rises across three meetings, with the RBA not scheduled to meet in April.

Commonwealth Bank and ANZ have not shifted their positions and continue to expect the RBA to hold rates until May. NAB and Westpac had previously shared that view.

For brokers assessing repayment sensitivity, a 0.25-point rise in March would add about $91 a month to repayments on a $600,000 loan with 25 years remaining. Across two rises in 2026 — February and March — the total increase would be about $181 a month. Under the three-rise scenario now suggested by NAB and Westpac, monthly repayments on the same loan would be higher by about $272.

Earlier, Bank of America has become the first major forecaster to formally tip a 25-basis-point move at next week’s RBA meeting, taking the cash rate to 4.6%. Analysts described such a shift as “contrary” to earlier market pricing, but argued it is increasingly needed to protect the central bank’s inflation-fighting credibility.

Capital Economics and UBS have also brought forward their expected timing for the next increase to March. The change in expectations follows a reassessment of inflation risks, including the impact of higher oil prices, which briefly moved above US$100 a barrel.

The reassessment has been driven by concern that inflation expectations are rising, alongside inflation running above the RBA’s 2–3% target band. Market focus has also turned to the risk of energy supply disruption and the extent to which a tight labour market may allow the RBA to lift rates without an immediate shock to activity.

“Borrowers hoping the worst of the rate hikes are behind them might need to brace themselves, with NAB and Westpac now tipping the RBA could ratchet up the pressure as soon as Tuesday,” said Sally Tindall (pictured right), data insights director at Canstar.com.au.

“Australia’s robust economy and jobs market, coupled with core inflation that is moving in the wrong direction, and likely to continue to do so, paint a strong case for a March hike.

“However, the split among the big four forecasts highlights just how uncertain the outlook currently is. The RBA is walking a tightrope between tackling persistent inflation and avoiding pushing too hard.

Tindall stressed that a cash rate hike next week is not a done deal. “The war in the Middle East has cast a huge cloud of uncertainty over the decision, because while the short-term impact of the conflict will push up prices, particularly fuel, the longer-term damage to the economy and jobs market is not yet clear,” she said.

“Even consumer confidence is difficult to interpret at this stage, as the unease among households increases as the days go by. With impact already being felt in areas like petrol, many people are becoming increasingly nervous.

“If the Westpac and NAB forecasts prove accurate, the RBA would deliver three back-to-back rate hikes across February, March and May – a scenario that would add further pressure to already stretched household budgets. For borrowers, the key message is to prepare for the possibility of higher rates, even if it’s not yet a done deal. Now is the time to make sure your mortgage is competitive.”

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