NAB economists now expect the Reserve Bank of Australia (RBA) to leave the cash rate unchanged at 3.6 per cent until May 2026, abandoning earlier forecasts for cuts in November this year and February 2026.
The shift follows stronger-than-expected inflation data for August, which the bank argued signals persistent price pressures that the central bank cannot afford to ignore.
In their latest outlook, NAB economists said the August consumer price index (CPI) result was a “meaningful upside surprise” to the RBA’s standing forecast.
They expect the September quarter’s trimmed mean inflation to print between 0.9 and 1.0 per cent, compared with the RBA’s 0.64 per cent estimate.
Services inflation, in particular, has come in hotter than anticipated, and NAB warned these components are typically more persistent than others.
“The signal in the August data is too strong to ignore,” the bank noted, arguing that the RBA will likely need at least two, if not three, quarterly inflation prints before being confident that price pressures are easing.
NAB now projects policy will remain modestly restrictive until May 2026, when easing resumes and the cash rate eventually settles at a terminal 3.35 per cent. They described the risks to that profile as balanced, but said the near-term path is clearly skewed towards a longer pause.
Other banks are more cautious in shifting their forecasts, though all acknowledge that the August CPI data has complicated the picture.
ANZ economists said the RBA board is almost certain to leave rates unchanged next week, but they expect the tone of communication to become more hawkish.
They noted governor Michele Bullock has already pointed out that domestic data have been broadly in line with expectations, if not slightly stronger.
ANZ sees the RBA placing significant weight on upcoming economic releases, particularly the September labour force report, household spending data and the third quarter CPI.
“Between now and November, these data will be decisive,” the bank said.
While they continue to expect the easing cycle to end at a cash rate of 3.35 per cent, the timing of when that occurs is now far less certain.
Belinda Allen, Commonwealth Bank head of Australian economics, also expects the RBA to hold the cash rate steady at 3.6 per cent next week, noting that markets have already priced out a September cut and halved the probability of a November move.
While she still expects one final 25 basis point cut later this year, she acknowledged the August inflation reading makes such a move “by no means guaranteed” and heavily data dependent.
Westpac chief economist Luci Ellis continues to project cuts in November, February and May, but concedes the timing is less certain after the August surprise.
She argued the latest data does not point to a renewed inflationary trend, stressing that developments in the labour market – including slower employment growth and declining vacancies – are an important counterweight to inflation concerns.
With the economy already near full employment, Ellis said the RBA will avoid both rushing to ease and holding policy overly tight for too long.
Despite differences in timing, economists broadly agree that the RBA is nearing the end of its easing cycle.
Gross domestic product growth has been tracking close to potential, household spending is beginning to lift, and business conditions have returned to average levels.
At the same time, inflation risks are skewed toward the upper end of the target band and the full impact of previous cuts has yet to be felt.
