Money markets see up to three RBA rate hikes by mid-2027, warning borrowers

Money market participants have shifted their outlook, now pricing three possible Reserve Bank of Australia rate hikes by May 2027, with a 95% likelihood of a move at the September meeting. A second increase in December carries a 44% probability, and a third in May 2027 a 17% chance. This marks a reversal from last week, when analysts were divided over one or two hikes.

The RBA has already raised the cash rate three times to 4.35% and is expected to lift it to 4.60% at its next meeting. Westpac and Commonwealth Bank of Australia have advanced their forecasts, citing materialising inflation pressures, while ANZ foresees two hikes, pushing the cash rate to 4.85%, the highest since 2008. RBA Governor Michele Bullock and Deputy Governor Andrew Hauser emphasized that rate rises are essential to bring inflation, currently at 3.5%, back within the 2-3% target. Persistently high trimmed-mean inflation and rising oil prices, driven by Middle East tensions, are feeding the upward pressure on rates, affecting mortgage holders across Australia.