The Reserve Bank of Australia (RBA) is widely expected to leave the cash rate unchanged at 4.35 per cent tomorrow, with banks and economists largely agreeing the June decision is unlikely to deliver another hike.
A Reuters poll of 45 economists found 42 expect the RBA to hold, making it one of the strongest consensuses this year.
The debate has instead shifted to whether the current cash rate marks the peak of the cycle, or whether inflation risks will force the central bank to tighten again later in 2026.
ANZ, CBA and NAB expect the RBA to keep rates on hold tomorrow, with all three viewing the current level as the likely peak.
CBA expects the RBA to remain on hold through 2026, with cuts possible in 2027, while NAB also expects rate cuts next year.
Westpac remains the clear outlier among the major banks, forecasting two further hikes in August and September that would take the cash rate to 4.85 per cent.
The bank has argued inflation risks remain too strong for the RBA to declare victory, citing higher energy prices, wages growth and Middle East tensions.
Economists broadly expect the RBA to pause after three rate rises this year, which have lifted the cash rate from 3.60 per cent to 4.35 per cent.
The case for leaving rates unchanged has also been supported by softer growth, after GDP rose just 0.3 per cent in the March quarter.
A higher unemployment rate has added to expectations that previous rate increases are beginning to weigh on the economy.
However, inflation remains above the RBA’s 2–3 per cent target band, limiting expectations for near-term rate cuts and keeping the prospect of further tightening alive.
Tomorrow’s statement is expected to be closely watched for any change in the RBA’s assessment of inflation, growth and labour market conditions.
Markets are likely to focus on whether the board maintains a hawkish bias or gives stronger weight to signs of slowing activity.
A hold is largely expected, but the tone of the statement could determine whether investors view the RBA as closer to the position held by ANZ, Commonwealth Bank and NAB, or closer to Westpac’s call for more tightening.
