RBA interest rates: Why most economists are now expecting at least one more hike this year

The Reserve Bank is now broadly expected to raise interest rates at least one more time this year after its deputy governor Andrew Hauser warned it couldn’t tolerate inflation remaining above target for an extended period.

“A consequence of that is that inflation has been above target for a long period of time and at some point we will have to say that is long enough,” he told the ABC’s 7.30 program on Tuesday night.

July’s headline inflation pace of 3.5 per cent marked the 12th straight month of the consumer price index being above the RBA’s 2-3 per cent target.

The Reserve Bank isn’t expecting it to get back within the band until June next year, which would be almost two years of the consumer price index being out of control.

“So, the reason for taking time is not over the horizon, but it’s long, I do agree,” Mr Hauser said.

Macquarie chief economist Ric Deverell on Wednesday became the latest to predict another RBA hike on September 29, following its next two-day meeting, which would take the cash rate to a 15-year high of 4.6 per cent, putting him on the same page as NAB.

“In the first half of 2025, it looked like the experiment had worked, with underlying inflation returning to the middle of the target band, allowing the RBA to claim victory by easing policy by 75 basis points,” he said.

“However, over the second half of 2025 both growth and inflation rebounded, forcing a reversal of the earlier cuts as the RBA acted to slow growth.”

Westpac on Tuesday became the last of the big four banks to predicting another hike in 2026 but on November 3, shortly before the Melbourne Cup, putting it in line with the Commonwealth Bank and ANZ.

The futures market sees a hike being the next move as a 66 per cent chance, but with that increase occurring in November instead of September.

While the major banks still see rate cuts in 2027, the market sees only a hike that would take the RBA cash rate to 4.85 per cent, or the highest level since late 2008.

Another rise would take the RBA cash rate to 4.6 per cent and be at the highest level since November 2011, adding $121 to monthly repayments on an average, new mortgage of $731,000.

The Reserve Bank’s three hikes in February, March and May have already added $354 to monthly repayments and another hike would mean borrowers with a new loan would be paying $475 more than they did at the start of this year.

That would add up to $5700 more a year in mortgage servicing costs, compared with early 2026.

But two more hikes would add $243 to monthly repayments, adding up to $2916 over a year and mean borrowers would be paying $7164 more a year servicing their home loan than they did at the start of this year.