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More cash rate pain could be on the way
Investors and owners are set to feel the pinch of a fourth cash rate rise in 2026, with some of the big four banks forecasting a hike at November’s RBA meeting following higher-than-anticipated inflation figures.
While the market had been holding out hope that the Reserve Bank of Australia (RBA) would remain stable with its cash rate adjustments throughout the remainder of 2026, some of the nation’s big banks have predicted that a fourth rise may be imminent.
The latest Australian Bureau of Statistics (ABS) data found the Consumer Price Index (CPI) rose 3.5 per cent in the 12 months to July 2026, from 3.8 per cent in the 12 months to June.
Meanwhile, trimmed mean inflation remained steady at 3.6 per cent, holding above the target range of 2–3 per cent.
Following the findings, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Australia and New Zealand Banking Group (ANZ) have adjusted their forecasts to predict a cash rate hike from the RBA before the end of the year.
NAB has made the largest adjustment to its predictions, anticipating a 25-ppt rise in the cash rate at the RBA’s next meeting in September.
Similarly, CBA and ANZ have adjusted their forecasts, with the next cash rate move expected to be a hike in November, while Westpac said it was not anticipating an adjustment for the remainder of 2026.
Prior to the latest findings, all four major banks predicted the RBA’s next movement would be a rate cut, sometime in 2027.
CommBank senior economist Trent Saunders said the July figures were stronger than anticipated, providing “less reassurance that underlying inflation is continuing to ease”.
“The figures raised the risk that further monetary policy tightening could be required,” Saunders said.
CommBank said another quarterly mean trimmed inflation result of around 0.9 per cent or higher would materially raise the risk of another rate rise later in 2026.
Looking at the data, ABS head of price statistics Rachael McCririck said the housing sector was the largest contributor to annual inflation, rising by 5 per cent due to the rising cost of new builds.
“New dwelling prices rose 5.7 per cent in the 12 months to July as builders passed on higher costs for materials and labour,” McCririck said.
Canstar.com.au data insights director Sally Tindall said the inflation figures were a “reality check” that both CBA and ANZ could not look past.
“The economic narrative has taken a U-turn in the space of just a couple of days,” Tindall said.
“Yes, annual headline inflation may have dropped in the latest data; however, this was because of a spike in electricity and travel prices from July last year, not from good progress we’ve made right now.”
Tindall said the board had signalled its intent to act if upside risks materialised, and the banks had begun to react.
“Based on yesterday’s inflation figures, two of Australia’s biggest banks now believe those risks are coming home to roost.”
“While both CBA and ANZ believe a hike will materialise in November, borrowers should know it will be front and centre of the discussions at the next Board meeting in just over a month’s time, and the RBA might not choose to wait.”
Treasurer Jim Chalmers said a major driver of the stubborn inflation data was the economic uncertainty stemming from fuel price movements and conflict in the Middle East.
He said that while inflation was substantially lower than forecast at budget time, it was still too high.
“We’ve made a lot of progress together in the economy, but there’s more work to do because people are still under pressure.”
“That’s why addressing inflation and helping with the cost of living was a big focus of the Budget, and it’s a big focus of the government alongside building a more productive and resilient economy,” Chalmers said.
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