ASX shares have spent 2026 climbing a wall of worry, and interest rates remain the tallest brick in it.
The Reserve Bank of Australia left the cash rate at 4.35% on 11 August, the central bank's next decision is due on 29 September.
For the first time in this cycle, the debate is no longer about when rates fall, but whether they begin to rise again.
Image source; Getty Images
Why a September hike is suddenly plausible
The Reserve Bank has not been subtle about its bias.
In its August statement, the Board spelled out exactly what would happen if inflation misbehaves.
The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if upside risks materialise.
The data since has not helped its case for patience.
Annual headline inflation eased to 3.5% in July, but the trimmed mean measure the Board watches most closely came in higher at 3.6%.
Household spending rose 1.1% in the month and 7% across the year.
Morgan Stanley now expects a hike in September, although Westpac chief economist Luci Ellis is less convinced and sees November as the more likely date.
The ASX shares most exposed to higher rates
Not every sector feels a rate rise the same way.
Let's focus on bank stocks.
Higher rates lift deposit costs, slow credit growth, and eventually show up in arrears.
Long-duration assets are the second group, because a higher discount rate reduces the present value of earnings that only arrive years from now.
Commonwealth Bank of Australia (ASX: CBA) is a good case study.
The shares closed last week at $157.25 and are down about 1% for the calendar year.
Morgans has a sell rating on the bank.
Analyst Damien Nguyen was blunt about the valuation:
Despite these headwinds, the stock trades at a significant premium to its peers and historical valuations.
A rate rise would not break CBA, but it would test a share price that has priced in near perfection.
Goodman Group and the duration problem
Goodman Group (ASX: GMG) is another example of how rate hikes can impact ASX stocks.
The industrial property and data centre developer finished last week at $27.92, down roughly 10% for the year.
The company's FY26 operating profit rose 15.7% to $2.675 billion, and work in progress reached $19.7 billion across 50 projects in twelve countries.
Occupancy held at 95.6%, and management is targeting 9% earnings per share growth in FY27.
The operating business is clearly performing.
But the unit price still struggles when bond yields rise, because a development pipeline stretching years into the future is worth less when money costs more.
That is the trade-off investors accept when they buy growth-heavy property exposure.
What this means for ASX shares more broadly
A single hike would not derail the market.
The S&P/ASX 200 Index (ASX: XJO) is still up 4% this calendar year and sits only a few percentage points below the record 9,296 points reached on 6 August.
Miners and healthcare names have carried much of that gain, and neither group is especially rate-sensitive.
The risk here is concentrated rather than general.
Foolish takeaway
I do not think investors should rebuild an entire portfolio around one meeting.
The Reserve Bank may well hold again, and Ellis makes a reasonable case that November is the more likely month.
But it is worth knowing which of your ASX shares you own for their yield today, and which you own for earnings that only arrive in 2030.
Those two groups behave very differently when the cash rate moves higher.
A September hike would be uncomfortable for banks and long-duration property, and largely irrelevant for a good deal of the rest of the market.
