Major bank predicts when Australian households can finally receive interest rate cuts after RBA holds rates on Tuesday

The chief economist of one of the nation’s largest banks has predicted when Australians can finally see interest rates decline.

The RBA held the cash rate at 4.35 per cent on Tuesday but warned further mortgage pain may loom as inflation remains “too high”.

“(The RBA board) will do what it considers necessary to (limit inflation and ensure full employment), including increasing the cash rate target further if required,” the board said.

NAB’s chief economist Sally Auld predicted the RBA will not hike for the remainder of 2026 and forecasted cuts the following year.

“As we get to early 2027, we think there’ll be probably enough evidence that inflation is on the way down (and) looks like it’s heading into the target band,” Ms Auld told Sky News.

“I think that will probably set the Reserve Bank up against a backdrop of slower growth and a looser labour market to entertain the idea of easings.”

NAB, alongside Commonwealth Bank of Australia and ANZ, has forecast two cuts in 2027.

Westpac believes there will be two more hikes in 2026 before two cuts are handed down next year.

Many economists predicted that Tuesday’s rate hold may be a temporary pause from further hikes.

KPMG’s chief economist Brendan Rynne said the rates pause could be “short lived” as higher diesel and fertiliser costs flow through to food and transport prices.

“For this reason, we can expect at least another hike this year, most likely in August, in order to bring core inflation back down to the mid-point of the RBA’s target band,” Mr Rynne said in a statement.

Deloitte Access Economics’ Stephen Smith similarly argued that Tuesday’s rate hold was a “pause rather than a pivot”.

“As the Monetary Policy Board said in its statement … it will lift rates ‘further if required’,” Mr Smith said.

“Another rate hike later in 2026 therefore remains firmly on the table.”

Rates were held despite trimmed mean inflation – the middle 70 per cent of price changes core to the RBA’s decision – rising to its highest level since September 2024.

The measure nudged up slightly from 3.3 per cent to 3.4 per cent in the year to April when housing costs lifted 6.3 per cent and transport costs rose 6.6 per cent.

Headline inflation – which includes all price changes in the consumer price index – slipped from 4.6 per cent in March to 4.2 per cent in April.

The RBA slashed rates three times last year before inflation surged again, forcing the central bank to undo its cuts in the first three meetings of 2026.

The three hikes since the beginning of the year have added $272 per month to mortgage repayments for a household owing $600,000 on their 25-year loan.