Bendigo Bank chief economist David Robertson has broken with the prevailing major-bank view on the Reserve Bank's cash rate trajectory, telling clients the central bank will sit on its hands at the May meeting before delivering a third 2026 rate rise in August.
The forecast, issued in mid-April, lands as Australian borrowers digest the fastest reversal in market expectations in years. Just eight months ago, futures markets were pricing in cuts that would have taken the cash rate below 3 per cent. Today, Bendigo is sketching a path that pushes the RBA further into restrictive territory.
"The RBA has already hiked rates twice this year, an extraordinary change from market expectations in August last year, when rates were projected to fall below 3 per cent," Robertson said.
His central call is for a pause in May while the Reserve Bank assesses the cumulative impact of the previous two hikes, plus the energy price spike emerging from the Middle East conflict. But by mid-year, Robertson believes the data will force the bank's hand again.
"We predict a hold in May, but with a likely third hike for 2026 in August," he said.
The reasoning sits squarely on inflation. Core inflation was running at 3.3 per cent as of February, comfortably above the RBA's 2 to 3 per cent target band. Higher borrowing costs and elevated fuel expenses are weighing on household spending, but Robertson noted that energy shocks and global supply disruptions are creating two-sided risks for the central bank.
Push too hard on rates, and the Reserve Bank risks tipping a fragile household sector into recession. Move too slowly, and inflation expectations could become entrenched at a time when oil prices remain volatile and global supply chains are reordering around the conflict in the Strait of Hormuz.
It is that balancing act that has put Bendigo at odds with the major banks. Most big-four economists have penciled in either an additional hike at the May meeting or one of the few remaining mid-year windows. Bendigo's call for an August move, by contrast, gives policymakers an extra quarter to assess incoming inflation prints and any softening in the labour market.
Robertson did not put a peak rate on the cycle, but characterised the broader environment in unusually candid terms, describing the policy backdrop as one of the most complex in years, with fragile household demand expected to slow further in the second quarter.
For mortgage borrowers, the practical takeaway is that the variable-rate cycle has not yet topped out. Multiple major lenders have already moved fixed rates higher in recent weeks despite the RBA being on hold, and Bendigo's August call implies a further leg of upward pressure across the curve before any peak is in sight.
What Robertson's forecast does, perhaps more than anything, is challenge the comforting idea that two hikes will be enough. With inflation sticky, oil markets unsettled and the federal budget arriving in May with potential tax changes that could complicate the inflation outlook further, his prediction is that the Reserve Bank's tightening work for 2026 is not yet finished.
