RBA Issues Warning on Inflation as Rate Hike Looms in September

Reserve Bank of Australia Governor Michele Bullock has signaled that interest rates may increase in September, amid concerns about inflation and supply shocks. In a speech to a Sydney business audience, Bullock emphasized the need for monetary policy to prevent temporary price increases from becoming more persistent.

Bullock noted that higher fuel costs are already being passed on by some businesses, which could lead to permanently higher prices for households. The RBA has increased the cash rate by 75 basis points in 2026 and forecasts inflation will not return to its target range until late 2027, with risks skewed towards further price pressure.

Commonwealth Bank and Westpac are now forecasting a 25-basis-point increase in interest rates, which would lift the cash rate from 4.35% to 4.60%. Financial markets are pricing in about a 90% probability of an increase, according to Commonwealth Bank.