- ANZ predict interest rate to stay for ‘extended period’
Mortgage holders are being warned to brace for a prolonged period of high interest rates after one of Australia’s Big Four banks abruptly scrapped plans for rate cuts expected within months.
The Reserve Bank of Australia kept rates on hold after a surge in inflation, signalling the cutting cycle may be over for the next year.
The unanimous decision to keep the cash rate at 3.6 per cent last month came despite 75 basis points of cuts since February.
Mortgage holders now face the prospect of a rate hike rather than a cut from February 2026.
Headline inflation has climbed to 3.8 per cent, well above the RB’s 2 to 3 per cent target band.
Annual inflation rose from 3.6 per cent o 3.8 per cent in October, while the trimmed mean inflation rate climbed to 3.3 per cent over the same period.
Put simply: if inflation stays high, rates go up; if it falls, rates hold — with room to drop further if the trend continues.
The RBA has made clear that future rate moves depend on inflation figures.
The RBA’s decision to hold rates has hit the big four banks, with ANZ scrapping plans for cash rate cuts expected early next year.
The major bank told customers in its latest economic update that the official cash rate will remain at 3.6 per cent for an ‘extended period’.
ANZ’s head of Australian economics, Adam Boyton, said the RBA is holding rates because its two mandates – price stability and full employment – are pulling in opposite directions.
‘We no longer see one final rate cut from the RBA in the first half of 2026, given recent inflation pressures,’ Mr Boyton wrote.
‘With growth around potential, the activity case for further easing is also less clear.’
ANZ has forecast only a temporary rise in the cost of living despite rising inflation.
The Big Four bank also believes the RBA won’t hike rates, as the recent rise in inflation is unlikely to last.
‘At the same time, the rise in the unemployment rate this year and conflicting signals across leading indicators of demand make it difficult to see a case for a 2026 rate hike,’ Mr Boyton continued.
‘That leaves us forecasting the RBA to be on an extended hold with the cash rate at 3.60 per cent – a rate relatively close to neutral, with a labour market that is, in our view, close to balanced and GDP growth around potential.’
Read more
- Will ANZ’s latest slash on fixed mortgage rates finally bring relief to Australian borrowers amid predictions of four RBA rate cuts in 2025?
- Is Australia on the brink of more cash rate cuts in 2025, or will inflation fears hold the RBA back?
- Why is ANZ defying expectations and hiking variable mortgage rates amidst looming RBA cuts?
- Will the RBA’s struggle with soaring inflation lead to a rare interest rate cut this May, impacting your wallet and borrowing costs?
- Why are Australia’s major banks betting on delayed rate cuts, while inflation stays strong despite government-funded rebates?
