RBA market commentary - September 2026 | Insight Investment

The RBA raised the cash rate by 25 basis points at its September meeting to 4.6%, in a unanimous decision in line with market expectations, marking the fourth rate increase this year and taking cumulative tightening in 2026 to 100 basis points.

The decision reflected the board's concern around persistent inflation pressures and emerging upside risks, including elevated inflation expectations, higher fuel prices, ongoing capacity pressures, and the global AI CapEx boom.

The statement reinforces that inflation remains the primary policy focus, with policymakers indicating they remain prepared to tighten further if required. The board, however, noted that financial conditions are already somewhat restrictive by a range of measures, including weakness in housing activity, subdued credit growth, and estimates of the neutral policy rate.

Policymakers also emphasized that much of the impact from previous rate increases has yet to be fully transmitted through the economy. The board also acknowledged a softer growth backdrop and weaker productivity growth.

Although near-term policy remains data-dependent, we continue to expect restrictive settings to weigh on household consumption and domestic demand.

Australia remains highly sensitive to interest rates, and the cumulative impact of tightening should support a gradual moderation in inflation over time. Market pricing retains some probability of additional tightening over coming meetings. While we believe this will be the peak in the tightening cycle with a prolonged pause from here. The RBA, however, will remain alert to further upside inflation surprises. At current yield levels, we continue to see value in Australian duration, particularly as slowing growth and easing inflation dynamics provide scope for policy rates to move lower next year.