ANZ Forecasts 3.7% Trimmed CPI as RBA Set to Hold Rates

For Australian fixed-income and currency markets, this week’s double bill—RBA Governor Bullock’s speech and June-quarter CPI—will be the main drivers of near-term pricing. While consensus firmly expects the cash rate to stay on hold at the August meeting, a hotter-than-forecast 3.7% core print or a hawkish pivot from Bullock could quickly reprices rate expectations, lifting bond yields and boosting the Australian dollar. With oil spiking on renewed Middle East tensions, the balance of risks is finely poised, demanding a recalibration of portfolio hedges.

This week brings two pivotal events for Australian monetary policy that will shape market expectations for the remainder of 2026. Reserve Bank of Australia (RBA) Governor Michele Bullock is set to deliver a speech in Sydney on Tuesday, followed on Wednesday by the Australian Bureau of Statistics' release of the second-quarter Consumer Price Index (CPI). These events come amid renewed geopolitical turbulence—fighting in the Middle East and rising tensions between the US and Iran have sent oil prices higher again—but economists broadly expect the central bank to keep interest rates on hold. Both Governor Bullock's remarks and the inflation print will be scrutinized for any sign that the RBA's confidence in easing price pressures is wavering. Following three rate hikes earlier this year that have visibly slowed the economy, the board is widely anticipated to pause at its next meeting in August. Still, the backdrop is shifting rapidly, and the stakes for households, businesses, and financial markets are high.

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Reserve Bank of Australia (RBA) Governor Michele Bullock is set to deliver a speech in Sydney on Tuesday, followed on Wednesday by the Australian Bureau of Statistics' release of the second-quarter Consumer Price Index (CPI).

National Australia Bank (NAB) senior economist Taylor Nugent articulates the prevailing view: despite rising oil prices, the RBA will likely have enough confidence in a slowing labor market and broader activity to refrain from further tightening in 2026. "Our position is there will be enough confidence in growth slowing in the labour market so that rates don't need to be tightened further," he told AAP. Nugent notes that the Q2 CPI data, due Wednesday, will capture a period of calm during the Middle East conflict when fuel prices had plummeted. That base effect should produce a benign headline number, giving the RBA ammunition to hold fire. NAB does not expect another rate rise this year, even though risks from elevated inflation, renewed cost pressures, and higher oil prices persist.

Commonwealth Bank of Australia (CBA) similarly argues that the RBA will remain on hold for the remainder of 2026. CBA analysts point to a "backdrop shifting rapidly"—the housing market has deteriorated, household spending is slowing from its earlier pace, and the capacity of businesses to pass on higher costs has weakened following three interest rate hikes in 2026. This domestic demand slowdown, in their view, offsets the potential inflationary impulse from higher commodity prices. CBA's assessment reinforces the baseline scenario: a steady cash rate through the year-end.

ANZ Research, meanwhile, provides the most concrete inflation forecast. It expects trimmed mean inflation—the RBA's preferred core measure—to come in at 3.7% year-on-year for the June quarter, slightly below the Reserve Bank's own forecast. This, combined with broader evidence of slowing economic activity, should be enough for the central bank to hold rates in August. However, ANZ sounds a note of caution: another rate hike cannot be ruled out in either August or November given the renewed escalation of tensions in the Middle East. Should those geopolitical risks translate into a sustained oil price surge and feed into underlying inflation expectations, the RBA might be forced to act despite domestic softening.

The oil price dynamic is critical. Crude oil futures have jumped as the confrontation between the US and Iran threatens supply routes, but the Q2 CPI data will not fully capture the latest price surge because it reflects transactions from the preceding quarter, a period when fuel costs actually fell. This creates a window of low headline inflation that could underpin a dovish tone in Bullock's speech. Yet the RBA cannot ignore the forward-looking risk: if elevated oil prices persist, they will eventually seep into transport costs, input prices, and ultimately core inflation. The governor may therefore acknowledge the improving near-term picture while emphasizing vigilance against external shocks.