The RBA is poised to join the rather exclusive club of advanced economy central banks that tightens policy in 2026. With growth accelerating when there’s little to no spare capacity and the labour market tighter than is consistent with full employment, the Bank will need to lift interest rates to prevent a continued overshoot of its inflation target. In contrast, the RBNZ will keep policy settings accommodative for a while to come, as it seeks to close the deeply negative output gap.
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