What happened
Investment bank UBS changed its base case to predict two 25 basis point rate hikes from the Reserve Bank of Australia in September and November 2026, pushing the benchmark cash rate to 4.85%. UBS cited a global AI-related investment boom and a sharp surge in domestic fuel prices, which added roughly 53 basis points to August headline inflation, as the key triggers for its revised forecast.
Why it matters here
Higher borrowing costs threaten to reduce consumer discretionary spending, increase monthly mortgage repayments, and weigh heavily on housing market valuations. UBS warns that a 4.85% cash rate could trigger a drop in Australian home prices of up to 10%, while higher interest rates continue to put pressure on heavily indebted households and broad ASX corporate profit margins.
What to watch
The Reserve Bank of Australia's upcoming monetary policy board meeting on September 28–29, where money markets and economists expect an immediate 25 basis point rate increase.
Source
marketindex.com.au