HSBC Australia chief economist Paul Bloxham anticipates the Reserve Bank of Australia (RBA) may increase interest rates earlier than his projected third quarter of 2026. This revised outlook follows January’s inflation reading of 3.8 per cent, which modestly exceeded market expectations.
Bloxham noted that the monthly Consumer Price Index (CPI) suggests core inflation remains above the RBA’s target range. However, he acknowledged the RBA’s reservations regarding the reliability of the monthly CPI data. He also highlighted that this inflation data predates the RBA’s interest rate hike in early February 2026.
Bloxham believes the RBA will proceed cautiously, considering the rapid shift from an easing to a tightening phase in monetary policy. He suggests the RBA will want to avoid triggering an economic downturn. Bloxham stated that the central bank will likely assess the impact of this policy shift on the economy.
Looking ahead, Bloxham is closely monitoring the Q4 2025 GDP data, scheduled for release next week, to assess the economic trajectory at the end of last year. Recent household spending data for December and the Q4 construction figures indicate potential downside risks to the RBA’s economic forecasts.
