RBA Faces More Pain for Mortgage Holders with Two Potential Rate Hikes Before 2027

Citi senior economist and analyst Faraz Syed predicts two more interest rate hikes before 2027, citing a 'two-speed economy' where a housing correction is offset by an AI-related investment boom. This will likely keep inflation high, with the RBA's Q3 trimmed-mean CPI forecast at 1 percent.

Syed believes the Reserve Bank of Australia needs to hike further to control inflation and has lifted his rate peak prediction to 4.85 percent from 4.6 percent. His rates forecast comes as Macquarie Bank predicted the RBA would lift the cash rate at its next meeting.

RBA Assistant Governor Sarah Hunter admitted that the central bank is concerned about inflation, which remains above target. If inflation continues to sit outside the 2-3 percent target band, there may be less wiggle room to avoid a rate hike.