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The Reserve Bank of Australia is widely expected to raise interest rates by 25 basis points on September 29 as persistent inflation and surging energy prices reinforce expectations for tighter monetary policy.
The RBA is forecast to lift its cash rate to 4.60%, marking its fourth 25-basis-point increase of 2026 and taking borrowing costs to their highest level in 15 years. ASX 30-day interbank cash rate futures indicate markets are pricing roughly a 90% probability of another rate hike.
Expectations for further RBA tightening have strengthened as Australian inflation remains stubbornly elevated. Strong domestic demand relative to supply has contributed to price pressures, while higher oil and gas prices linked to the U.S.-Iran conflict have increased energy costs across the economy.
Monthly consumer price index data due later this week is expected to show headline inflation accelerating to 4.1%. Core inflation is also projected to remain well above the RBA's annual target range of 2% to 3%.
ANZ analysts expect the central bank to deliver another 25-basis-point increase in November, citing the Middle East conflict and the RBA's tendency to view rising oil prices primarily as an inflationary shock rather than a drag on economic growth.
RBA Governor Michele Bullock recently warned that inflation could remain elevated in the coming months, while higher interest rates and rising unemployment should eventually help curb price pressures. Assistant Governor Sarah Hunter has also highlighted persistent inflation risks.
A rate increase could pressure Australian equities, particularly rate-sensitive technology and mining stocks, as higher borrowing costs reduce investor appetite for risk assets. Bank shares, however, could receive some support from higher interest rates. Additional hawkish comments from Bullock could also weigh on the ASX 200 in the near term.
The Australian dollar may benefit from tighter monetary policy. AUD/USD has gained about 5.2% in 2026 as the RBA raised rates, and further hawkish signals could provide additional support after the currency reached a four-year high earlier this year.
