RBA Hikes to 4.60% as NAB Warns AUD Rally May Fade

The Reserve Bank of Australia raised its cash rate by 25 basis points to 4.60% on 29 September 2026, the highest level since November 2011 and the fourth increase of the year. The decision landed at 2:30pm AEST, with Governor Michele Bullock's press conference following an hour later. AUD/USD has been trading around 0.70, with US dollar strength and higher Treasury yields already acting as a headwind, while National Australia Bank argued the move supports the currency near term but carries a medium-term risk pointing the other way.

Context — why this RBA decision matters now

NAB frames the Australian dollar's problem as two-sided. A hike today, and any signal of a November follow-up, supports the currency in the near term. The medium-term risk runs opposite: the rate premium Australia now holds over other G10 markets could erode if traders begin pricing earlier RBA easing than at its peers.

That premium is the change NAB highlights. Australian rates have moved from near the bottom of the G10 range to near the top, a shift that reframes Australia from a low-yield laggard into a high-yield carry candidate.

The catalyst chain is domestic. Sticky core inflation pushed the RBA toward its highest cash rate since 2011, and all four major Australian banks forecast the move to 4.60% ahead of the decision. NAB made its own call for a September hike in late August and sees a meaningful risk of another increase in November.

Market pricing has followed. A Reuters poll found 33 of 34 economists expecting today's increase. Attention now sits on the statement and Bullock's press conference for any signal on whether November remains live.

Data — what the numbers show

The concrete figures centre on the cash rate and the forecast path. A move to 4.60% would be the highest since November 2011 and the fourth hike of 2026. NAB sees a meaningful risk of a further increase in November.

Economists are less united beyond today. In the Reuters poll, 26 of 31 respondents saw the cash rate still at 4.60% at the end of December, with a minority expecting 4.85%.

Horizon	Median cash rate view
End-December 2026	4.60%
End-2027	4.35%

The median forecast had the rate back at 4.35% by the end of 2027, though views split widely from the third quarter of that year. CBA has pushed back the timing of its first expected cut to August 2027, and said a strong September-quarter trimmed mean inflation reading of 1% or more could put another hike on the table. Westpac has flagged the possibility of a split vote on the board. NAB notes markets are not pricing a significant Australian easing cycle.

Analysis — what it means for markets and sectors

The second-order effect runs through the currency and rate-sensitive domestic assets. If the RBA delivers the tightening currently priced by markets, NAB says it may eventually be able to cut rates before other G10 central banks. That sequencing matters for carry trades built on Australia's newly elevated rate premium.

NAB's central argument is that Australia is not the United States. It points to gradually rising unemployment, deteriorating business margins, falling house prices and growth signals that are less convincing. Those are the channels through which an early pivot would transmit: a softer labour market and weaker housing would pull forward easing expectations, compressing the premium the currency now enjoys.

The counter-argument sits in the inflation data. CBA's view that a trimmed mean reading of 1% or more could put another hike on the table shows the tightening cycle is not mechanically over. Westpac's flagged possibility of a split vote underlines that the board itself is not unanimous.

Positioning reflects the split. Markets have moved firmly toward a hike, with all four major banks aligned, but are not pricing a significant Australian easing cycle. That leaves room for repricing in either direction once the statement lands.

Outlook — what to watch next

Two catalysts dominate. The first is the RBA's statement and Bullock's press conference, specifically whether the board keeps November open. The second is the September-quarter trimmed mean inflation reading, which CBA has said could determine whether another hike is live.

The November meeting is the next scheduled decision point NAB flags as carrying a meaningful risk of further tightening. Beyond that, the median forecast of 4.35% by end-2027 frames the eventual easing path, though views split widely from the third quarter of that year.

On levels, AUD/USD has been trading around 0.70, with US dollar strength and higher Treasury yields already a headwind. How quickly markets bring forward pricing for easing, if the tightening cycle ends, is the variable NAB identifies as the medium-term risk.

Frequently Asked Questions

What does the RBA's 4.60% cash rate mean for the Australian dollar?

NAB argues further hikes can support AUD in the short term because Australian rates now sit near the top of the G10 range rather than near the bottom. The medium-term risk is the opposite. If Australia finishes tightening first and becomes one of the first central banks forced to reverse, the rate premium underpinning the currency could erode, particularly if traders price earlier RBA easing than at its peers.

Why does NAB think Australia may cut rates before other G10 central banks?

NAB's argument is that Australia is not the United States. It cites gradually rising unemployment, deteriorating business margins, falling house prices and growth signals that are less convincing. On that basis, if the RBA delivers the tightening markets currently price, NAB says it may eventually be able to cut before other G10 central banks. Markets are not pricing a significant Australian easing cycle.

What happens next for the RBA after the September hike?

NAB sees a meaningful risk of a further increase in November. The Reuters poll showed 26 of 31 respondents expecting the cash rate still at 4.60% at end-December, with a minority at 4.85%. CBA has said a strong September-quarter trimmed mean inflation reading of 1% or more could put another hike on the table, and Westpac has flagged the possibility of a split board vote.

Bottom Line

The RBA's hike to 4.60% supports AUD near term, but NAB warns Australia may finish tightening first and reverse first.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.