Strong inflation data pushes RBA toward 4.60% rate, highest since 2011

With 33 out of 34 economists predicting a rate increase, Tuesday's decision is nearly fully priced in. Consequently, the Australian dollar is likely to respond more to the RBA's statement and Governor Bullock's press conference than to the rate move itself. Should the central bank indicate willingness to raise rates again, the AUD could strengthen and short-term yields might increase as markets factor in a November move. Conversely, a clear signal that this is the only hike could reduce some of the tightening premium in the currency. Australia's policy rate would also move further above most G10 peers, benefiting the AUD in cross pairs, particularly AUD/JPY and AUD/NZD.

---

Report via Reuters based on its poll. 

Thursday's employment data will not prevent next week's rate increase:

• AUD little changed: Australia jobless rate hits 4.6%, highest since 2021, participation outpaces jobs beat

---

One month ago, economists anticipated the RBA would keep rates steady in September. Now nearly all foresee an increase to 4.60% on Tuesday, with the debate shifting to whether this is the cycle peak or merely an intermediate step.

Summary:

• 33 of 34 economists expect the RBA to lift the cash rate 25 basis points to 4.60% on September 29, the highest level since late 2011
• This would be the fourth hike of 2026, totaling 100 basis points of tightening
• 26 of 31 see the cash rate remaining at 4.60% at end-December; a minority anticipate 4.85%
• One month ago, nearly all economists predicted a September hold and a peak of 4.35%
• Trimmed mean inflation stayed at 3.6% in July, versus the RBA's year-end forecast of 3.3%
• The median projection has the cash rate back at 4.35% by end-2027, but forecasts diverge widely from Q3 2027

The Reserve Bank of Australia is forecast to increase its cash rate 25 basis points to 4.60% at Tuesday's meeting on September 29, according to a Reuters poll released just after 6am Sydney time on Friday, providing an early alert for local rates desks. Only one of the 34 economists surveyed from September 17 to 24 does not expect the move, which would bring the cash rate to its highest point since late 2011.

An increase on Tuesday would mark the RBA's fourth of the year, bringing total tightening in 2026 to 100 basis points. Most respondents view this as the cycle's final increase, with 26 of 31 forecasting the cash rate will remain at 4.60% at end-December. A few predict an additional rise to 4.85% by the end of the year.

The consensus has shifted dramatically in a brief period. One month ago, almost all economists expected the RBA to hold in September, and median forecasts saw the cash rate topping out at 4.35%. That outlook has been overtaken by stronger inflation pressures since the August meeting and by Governor Michele Bullock's concerns that policy was not tight enough to bring inflation back to the bank's 2% to 3% target range.

Core inflation remains the primary concern. The trimmed mean measure, the RBA's preferred indicator, held at 3.6% in July, while the bank's own projection sees it easing to 3.3% by year-end. The economy also expanded slightly faster last quarter than the roughly 2% pace the RBA considers sustainable without stoking price pressures, even as momentum slowed.

HSBC chief economist for Australia and New Zealand Paul Bloxham, one of five expecting another hike next quarter, argued that the RBA is losing patience with above-target inflation. He stated that it must demonstrate that returning inflation to target within its late-2027 timeframe takes priority. Stronger-than-expected growth, disappointing productivity, and a July monthly inflation reading that was too hot prompted him to shift to a September hike call. He anticipates core inflation will exceed forecasts in the coming months.

Among the major domestic banks, CBA, NAB and Westpac see the cash rate ending the year at 4.60%, while ANZ expects 4.85%. NAB stated that the risks clearly point toward a follow-up move in November, though that is not its base case.

• All four major Australian banks now forecast RBA hike to 4.60% on September 29

Looking beyond this year, economists generally expect the cash rate to remain at 4.60% through mid-2027, before views diverge significantly from the third quarter. The median forecast sees the rate back at 4.35% by end-2027, within a wide range from 4.85% at the top to 4.10% or lower at the bottom. For now, Tuesday's decision and the tone of the accompanying statement will determine whether markets view 4.60% as a peak or simply a milestone.