Overview
- Citi now forecasts two 25 basis point RBA increases in 2026, with the first on February 3 and a second in May.
- The bank cites a tight labour market, stronger household spending, and a rapid housing rebound that is lifting construction costs and rents.
- Citi warns that delaying action risks letting inflation pressures become entrenched and undermining policy credibility.
- Rates markets have repriced quickly, with about a 23% chance assigned to a February hike, a full 25bp by August, higher front-end yields, and greater AUD sensitivity to inflation and jobs data.
- Citi flags government housing policy settings as a contributor to price pressures, while CBA and NAB also project a February move based on resilient growth and sticky underlying inflation.