The RBA's Next Move: What to Expect Tuesday

The Reserve Bank of Australia will lift the cash rate by a quarter of a percentage point to 4.60% on Tuesday, and the futures market puts a 90% chance on it (RBA Rate Tracker). Our judgement concerns what follows. We expect at least one more rise, to 4.85%, and no cut before the second half of 2027.

Tuesday's rise is nearly settled

The cash rate — the benchmark interest rate the Reserve Bank sets for the rest of the economy — is 4.35% (RBA Rate Tracker). The Board last left it unchanged on 11 August 2026 (RBA). Its next decision is due on 29 September 2026 at 2.30pm Australian eastern time.

The number that matters most this week is not a forecast. It is a price. Traders buy and sell contracts that pay out according to where the cash rate sits, and the October 2026 contract was trading at 95.425 as at 24 September 2026. The exchange that runs the market says that price means a 90% expectation of a rise to 4.60%. The chance of no change was 10%.

The chance given to a rise has grown through September. It was 62% on 4 September and 90% on 24 September.

ASX-implied probability of a 25bp RBA rate rise, 4-24 September 2026 (ASX Rate Tracker)

A second count, from LSEG data reported by the ABC on 18 September 2026, put the September chance at 95% and a November follow-up at 37% (ABC).

The ABC reported that economists believe the Board will rubber-stamp a rise to 4.6%. Commonwealth Bank's Belinda Allen moved to a call for a September rise on 21 September 2026, brought forward from November (RBA Expected To Lift Interest Rates Next Week). RBC's Robert Thompson called September "all but a lock". Capital Economics' Marcel Thieliant called a September move "a done deal". Westpac's Luci Ellis said November was tactically better, but that September "is a genuine possibility as well".

Governor Michele Bullock gave the clearest reason on 18 September 2026. Businesses show "much more of an inclination to think that we need to pass through these cost increases because it's going to be much more persistent". She added: "we can't respond to that by letting inflation get out of control".

Why we expect more than one rise

There is a level of the cash rate that neither speeds inflation up nor slows it down. It is called the neutral rate. The RBA's August 2026 statement assumed a cash rate path "a bit above the top of the range of estimates of the neutral cash rate" (RBA). At 4.60% the Bank is only just holding inflation down, and only while it stays there.

The RBA's own forecasts make the problem plain. Trimmed mean inflation — a measure that strips out the jumpiest prices — is expected to stay above 3% until mid-2027. Headline inflation is forecast to return to the 2-3% target range by early 2027. In the June quarter of 2026, headline inflation eased to 3.9% (Economic Conditions). Trimmed mean inflation rose to 3.6%. Unemployment averaged 4.4% over that quarter, below the RBA's estimate of full employment.

So a cash rate of 4.60% leaves inflation above target for another year. Oil adds to it. Brent crude climbed from around US$80 a barrel to above US$100, per Commonwealth Bank on 21 September 2026 (RBA Expected To Lift Interest Rates Next Week).

RBC puts the peak at 4.85% (ABC). Commonwealth Bank says a September-quarter trimmed mean inflation result of 1% or more could put another increase on the table. It adds that a move to 4.85% "would represent a significant shift towards prioritising inflation risks".

Capital Economics disagrees, expecting no further tightening after September and judging policy already restrictive. We think that is the wrong call. Inflation above 3% into 2027, on the Bank's own numbers, will not be fixed by a cash rate that sits barely above the neutral rate.

Traders see it the same way over the longer run. Futures imply the cash rate keeps climbing past Tuesday, holding just above 5% in the middle of 2027 before easing slowly into 2028 (RBA Rate Tracker).

Market-implied cash rate path from ASX 30-day interbank futures, September 2026 - February 2028 (ASX Rate Tracker)

RBC keeps its first cut in November 2027. Commonwealth Bank expects 50 basis points of cuts in 2027 and has pushed the first back to August 2027 from May.

The inflation number the Board will not see

The Board decides without the newest inflation figures. The August 2026 consumer price index will not be published until 30 September 2026, the day after the decision (Consumer Price Index Australia). The latest release is the July 2026 index.

Minutes of the September meeting are due on 13 October 2026 (RBA). The next decisions are on 3 November and 8 December 2026.

What would change our mind

Commonwealth Bank's newsroom reports that unemployment rose to 4.6% in August 2026 (RBA Expected To Lift Interest Rates Next Week). It also reports that household spending rose by just 0.1% in August. The RBA's August statement says average housing prices have fallen 1.6% from their March 2026 peak (Economic Conditions). Its assistant governor Brad Jones said Sydney and Melbourne have seen 5% to 6% declines in 2026, with 1% to 2% in the other states (ABC).

The RBA forecasts growth of 1.4% through the year to December 2026 (RBA). It forecasts unemployment rising to 4.8% by the end of 2028 from 4.4% in June 2026. Those who lose their jobs bear the cost of bringing inflation down.

If spending keeps falling and unemployment keeps rising, the Board could stop at 4.60%. But stopping early, with inflation above 3% into 2027, means a bigger rise later on.

The US Federal Reserve raised rates in September 2026 (What The Us Fed Raising Rates Means For Australia P60Y3P). The two central banks are described as marching in lockstep.

Tuesday's rise is the easy part. The hard part is whether the Board keeps going. We expect it will.

Nothing here is financial, legal or investment advice. Every figure is published by its named source and carries the date it was published; figures may since have changed.