Aussie mortgage holders and investors may be facing another interest rate rise, with expectations shifting quickly after the latest inflation figures.
The Reserve Bank of Australia (RBA) left the cash rate unchanged at 4.35% earlier this month after 3 hikes in 2026. But the chances of another increase are growing.
Attention is turning to the next RBA decision on 29 September, with several major banks changing their forecasts and financial markets also increasing the odds of another hike.
So, could interest rates really rise again next month?
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Inflation keeps the pressure on
The latest Consumer Price Index (CPI) data showed annual inflation easing from 3.8% in June to 3.5% in July.
That sounds like a move in the right direction, but inflation was still higher than the 3.3% economists had expected. Trimmed mean inflation also stayed at 3.6%, which is still above the RBA's 2% to 3% target range.
On a monthly basis, trimmed mean inflation rose 0.5%, ahead of expectations for a 0.3% increase.
The RBA was already keeping a close eye on inflation. Minutes from its August meeting showed board members discussed another 25-basis point hike before deciding to wait for more data.
And the RBA also got another strong economic reading, with household spending rising faster than expected.
Household spending rose 1.1% in July and was 7% higher than a year ago, with spending increasing across all 9 categories. It's the strongest annual growth since June 2023.
What are the big banks predicting?
Three of Australia's four major banks now expect another RBA rate hike before the end of 2026.
National Australia Bank Ltd (ASX: NAB) has the most aggressive forecast, predicting a 25-basis point increase in September, which would take the cash rate to 4.6%.
It also sees a risk of another hike in November if the economy continues to hold up.
Commonwealth Bank of Australia (ASX: CBA) and ANZ Group Holdings Ltd (ASX: ANZ) are both forecasting a rate rise in November, although CBA believes there is also a risk the RBA moves earlier in September.
Westpac Banking Corp (ASX: WBC) is taking a different view and still expects rates to stay unchanged for the rest of the year, pointing to a softer labour market and weaker housing conditions.
According to Reuters, markets are now pricing around a 50% chance of a September rate hike, up from 17% before the inflation data.
What happens next?
The next RBA decision is due on 29 September, so there are still a few weeks of economic data to come before the board makes its call.
Keep an eye on the September and November meetings, as they will now be the ones to watch.
