ANZ and Westpac Forecast Two RBA Rate Hikes in March and May 2026

ANZ has joined Westpac in predicting that the Reserve Bank of Australia will raise interest rates at both its March and May 2026 meetings. Analysts cite persistent inflation and a resilient labor market as the primary drivers behind these expectations, with the cash rate potentially climbing to approximately 4.35%.

ANZ economists anticipate a 25-basis-point increase at the RBA's March 16–17 meeting, followed by another quarter-point hike in May. Westpac shares this outlook, with both institutions pointing to ongoing inflation pressures as a critical concern for Australian monetary policy.

A significant factor shaping this forecast is the economic fallout from Middle East tensions. ANZ economists highlight that higher energy costs represent the most immediate impact on Australia, as rising prices erode household disposable income and gradually soften consumer demand. Despite these headwinds, Australia's economy expanded 2.6% year-on-year through the fourth quarter of 2025, a growth pace the RBA considers above its long-term potential.

Recent consumer price data has also shown signs of demand-driven inflation, reinforcing the case for further tightening. A tight labor market continues to support wage growth and spending, making it harder for inflation to cool without deliberate policy intervention.

Australia's position as a net energy exporter may cushion some of the global price shocks. Elevated liquefied natural gas prices could strengthen the country's terms of trade, providing a partial economic offset to broader inflationary pressures.

However, ANZ believes the RBA is likely to pause once the cash rate approaches 4.35%, taking time to evaluate whether current policy settings are sufficiently restrictive and to monitor how global geopolitical developments continue to shape the domestic economic outlook. Markets and households alike will be watching closely as the central bank navigates this delicate balancing act.