ANZ's Forecast on Interest Rates#
ANZ, one of Australia's major banks, has predicted that the Reserve Bank of Australia (RBA) will increase interest rates in both March and May. This forecast is based on ongoing inflation pressures and a strong labor market.
Expected Rate Increases#
Analysts at ANZ anticipate that the RBA will raise its cash rate by 25 basis points (0.25%) during its meetings on March 16-17 and again in May. If these increases occur, the cash rate would rise to approximately 4.35%. Westpac, another major bank, shares a similar outlook, expecting rate hikes in both months.
Impact of Global Events#
ANZ economists noted that the conflict in the Middle East is contributing to higher inflation in Australia. They pointed out that rising energy costs could reduce household disposable income, which may eventually lower consumer demand.
Economic Context#
Inflation remains a significant concern for the RBA, especially as the Australian economy shows strong growth. The country’s gross domestic product (GDP) grew by 2.6% year-on-year through the fourth quarter of 2025, a rate considered above potential by the central bank. Additionally, recent consumer price data indicates demand-driven inflation, coupled with a tight labor market, which may prompt the RBA to act swiftly to manage inflation expectations.
Future Considerations#
Despite these anticipated rate hikes, ANZ suggests that the RBA may pause once the cash rate reaches around 4.35%. This pause would allow the bank to assess whether the current monetary policy is effective and to evaluate the economic consequences of global geopolitical events.