Rate hikes nearing their end

The RBA will deliver another 25bp hike in September, given continued stickiness in underlying inflation. But unlike markets we doubt further tightening will prove necessary. With the labour market cooling and the housing downturn going from bad to worse, we expect the Bank to start cutting rates from Q3 2027. Meanwhile, New Zealand’s recovery should gather pace, but substantial spare capacity should keep underlying inflation contained. We expect the RBNZ to hike twice more this cycle but stop short of shifting policy into restrictive territory.