As the banking majors lay down their forecasts, a Big Four outlier emerges
The Reserve Bank of Australia's (RBA) Monetary Policy Board is widely expected to hold the official cash rate at 4.35% when it delivers its June decision on Tuesday.
Three consecutive rate rises this year have returned the cash rate to its prior cycle peak, and all four major banks now agree the RBA will pause this month to assess the cumulative impact of its tightening.
The May hike marked the third consecutive increase of 2026, following rises in February and March that together reversed nearly all of the easing delivered across 2025.
At its May meeting, the RBA's Monetary Policy Board cited inflation that had "picked up materially in the second half of 2025", not least due to the Middle East conflict slamming fuel and commodity prices higher.
RBA Governor Michele Bullock acknowledged the conflict had "complicated things immensely" and "made the trade-off much, much worse", while noting the current rate level of 4.35% gives the board some "space" to monitor how the Iran war plays out.
Read more: Is Middle East supply shock less severe on businesses than feared?
Bullock warned, however, that second-round effects of the fuel crisis could still prompt further hikes down the line.
For now, Canstar data insights director Sally Tindall reckons the June decision is all but settled. "The Reserve Bank is almost certain to leave the cash rate on hold (this) Tuesday for the first time in 2026,” she said.
What the big four are saying
Three of the four major banks – Commonwealth Bank, NAB and ANZ – expect the cash rate to remain at 4.35% for the remainder of 2026, with cuts pencilled in for 2027.
Westpac remains the clear outlier. While it expects a hold on Tuesday, the bank expects another 25-basis-point increase in each of August and September. “This is consistent with the RBA’s priority to get inflation down,” said Westpac analysts Luci Ellis and Neha Sharma.
Ellis’ and Sharma’s forecast isn’t set in stone though. “Given the weaker outlook for the household sector, risks are skewed to the downside, in the sense that zero or one hike from here is much more likely than three hikes. We still regard our two-hike track as the most appropriate base case view, given the inflation outlook,” they said.
CBA's economics team said the May decision had given policymakers room to pause and assess how the economy evolves, with its base case for the cash rate to remain on hold for the remainder of 2026 – and the potential for rate cuts emerging in 2027 if inflation continues moving back towards target and spare capacity opens up in the labour market.
“From here we do see a period of ‘on hold’ from the RBA, depending on economic outcomes and global developments,” said CBA head of Australian economics Belinda Allen.
NAB senior economist Taylor Nugent struck a similar tone, saying: “The RBA has now recalibrated policy and we're seeing evidence it was enough to get on top of domestically driven inflation pressures. That means the RBA can sit and hold from here while it assesses risks to inflation and growth coming out of the conflict in the Middle East.”
NAB now forecasts a gradual easing cycle, with the cash rate reaching 3.6% by the end of 2027.
ANZ has similarly shifted to a higher-for-longer stance before eventually easing, with the bank predicting 25-basis-point cuts in September and December of 2027, bringing the cash rate to 3.85%. "Looking further ahead, with the broader signs of an economic slowdown and interest rates restrictive, rate cuts are likely to be the next sequence of rate moves," said ANZ chief economist Adam Boyton.
What it means for brokers and their clients
The banks have moved swiftly to pass RBA rate hikes through to borrowers this year.
Analysis from Compare the Market shows the RBA's three previous hikes have added $4,128 a year to the average mortgage holder's repayments – a figure that translates to roughly $6,000 in pre-tax income when the full earning burden is factored in. Another rate hike would inevitably lead to a further squeeze on buying power.
“I just don’t think the Reserve Bank understands how tough it is for Australian households at the moment,” said Compare the Market economic director David Koch. “They’re being crunched – absolutely crunched – by the last three interest rate increases, rising petrol prices, and the uncertainty around tax changes, particularly for small business owners. It is essentially forcing everyone into hibernation.”
Joseph Daoud, broker and founder of It’s Simple Finance, warned that homeowners and property investors will be most exposed to further rate hikes.
“My message to both groups is the same: don't wait for the RBA to make your decision for you. Stress-test your repayments, review your lending now, and build a buffer while you can because the borrowers who get ahead of these cycles are the ones who plan for them,” said Daoud.
The RBA's June cash rate decision will be announced at 2:30pm AEST on Tuesday, 16 June 2026.
