RBA rate hikes are coming next year after red-hot inflation

Investment banks Barrenjoey and UBS, along with the bond market, are betting the Reserve Bank of Australia will raise interest rates rather than cut them next year after a red-hot inflation report wrong-footed everyone.

Barrenjoey chief economist Jo Masters has flipped her rate forecast, and is now predicting the RBA will lift the cash rate as early as May to 3.85 per cent, followed by another move higher in August. The bank had previously pencilled in one more rate cut in 2026.

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