Financial markets are now tipping that the Reserve Bank of Australia (RBA) will deliver a 25 bp increase in the official cash rate in 2026, most likely in the second half of the year.
This view is based on the acceleration of trimmed mean inflation, as well as recent solid domestic demand reported in the Q3 national accounts and in consumer reports such as the ABS monthly Household Spending Indicator.
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I remain less hawkish because I expect the nation’s unemployment rate to drift higher in 2026, breaching the RBA’s optimistic forecast of stable unemployment.
