Will the RBA cut interest rates in 2026?

The consensus among major bank economists is that the RBA will hold the cash rate at 4.35% through the rest of 2026 and begin cutting in 2027. CBA specifically forecasts no further hikes in 2026 and cuts starting in 2027 if inflation tracks back toward target. Westpac is the major dissenter, forecasting two more hikes in August and September 2026 to a peak of 4.85%, with cuts following in mid-2027. The first cut is unlikely before the first half of 2027 in any scenario.

What is the RBA cash rate in Australia right now?

The RBA cash rate is 4.35% as of May 2026, following the third consecutive 25 basis point hike delivered at the 5 May 2026 board meeting. This matches the November 2023 peak and is the highest level since 2011. Standard variable mortgage rates at the major banks range from 8.92% to 9.07% at this cash rate level.

How much more will mortgage repayments increase if the RBA hikes again?

Each 0.25% cash rate increase adds approximately $83/month on a $400,000 loan, $104/month on $500,000, $125/month on $600,000, and $156/month on $750,000. If Westpac's forecast of two more hikes (to 4.85%) proves correct, borrowers on a $600,000 loan would pay approximately $250 more per month than they do today, on top of the $375/month already added since February 2026.

When will Australian interest rates start to fall?

Under the CBA base case, which assumes the RBA holds at 4.35%, rate cuts could begin in early-to-mid 2027, contingent on inflation returning sustainably to the 2-3% target band. Under Westpac's more hawkish scenario, the peak rate of 4.85% would be reached in late 2026 before cuts begin in 2027. In all scenarios, meaningful rate relief is at least 12-18 months away for most Australian mortgage holders.

What should I do with my mortgage now given the uncertain rate outlook?

With rates potentially rising further or holding at elevated levels for 12-18 months, there are three practical steps: (1) Review your current rate against what other lenders offer — in a competitive refinancing market, a 0.5% improvement is possible for many borrowers. (2) If you are stressed by current repayments, speak to your broker about hardship provisions before missing a payment. (3) Consider a split loan where part is fixed (providing certainty) and part is variable (allowing you to benefit from future cuts). A broker can model each scenario against your specific loan size and term.

Breaking TodayInterest RatesCPI Data

April CPI Data Released: Is Rate Relief Finally Coming for Australian Homeowners?

Q: What did Australia's April 2026 CPI data show?

The Australian Bureau of Statistics released the April 2026 monthly CPI indicator on 27 May 2026. The monthly CPI rose 0.4% in original terms but fell 0.1% seasonally adjusted, suggesting some softening in underlying momentum. The annual trimmed mean inflation eased slightly to 3.4%, down from 3.5% in March. However, inflation remains well above the RBA's 2-3% target band, and the RBA does not expect it to return to target until mid-2027.

The ABS released Australia's April 2026 monthly CPI indicator this morning. Trimmed mean inflation eased slightly to 3.4% annually, down from 3.5% in March, and the monthly reading fell 0.1% in seasonally adjusted terms. It is the first encouraging signal in months. But with inflation still well above the RBA's 2-3% target and three rate hikes already delivered in 2026, relief for Australia's 3.2 million variable-rate mortgage holders remains at least 12 months away. Here is what today's data means and what comes next.

Raj Bhangu

Principal Mortgage Broker, iSmart Finance Group

27 May 2026 · 8 min read

What did Australia's April 2026 CPI data show and what does it mean for rates?

The ABS released the April 2026 monthly CPI indicator on 27 May 2026. The monthly reading fell 0.1% seasonally adjusted — the first monthly decline this cycle. Trimmed mean (underlying) inflation eased to 3.4% annually, down from 3.5% in March. Headline annual inflation is approximately 4.4%. While the data is directionally positive, inflation remains well above the RBA's 2-3% target. The RBA does not expect inflation to return to target until mid-2027. Rate cuts are unlikely before 2027. The June 16 RBA meeting is expected to result in a hold at 4.35%, though a minority of economists are calling for a fourth hike.

Key Takeaways

1April monthly CPI fell 0.1% seasonally adjusted — the first monthly decline in six months.
2Trimmed mean (underlying) inflation eased to 3.4% annually, down from 3.5% in March.
3The RBA still forecasts inflation above target until mid-2027 — cuts remain at least 12 months away.
4CBA: hold at 4.35% for the rest of 2026. Westpac: two more hikes (August, September) to 4.85%.
5Market pricing implies approximately 60 basis points of additional hikes by end-2026.
6A $600,000 variable-rate borrower is already paying $375/month more than before the February 2026 rate cycle began.

What Today's CPI Data Actually Shows

The April 2026 monthly CPI indicator, released by the ABS at 11:30am AEST today, delivered a cautiously positive signal. The monthly CPI rose just 0.4% in original terms and fell 0.1% in seasonally adjusted terms — the first monthly seasonally adjusted decline since October 2025. Annual trimmed mean inflation, the RBA's preferred underlying measure that strips out volatile items, eased to 3.4%, down from 3.5% in March.

The softening in April was partly driven by a pullback in fuel prices, which had surged in March following Middle East supply disruptions. Insurance costs and rents continued to rise, keeping services inflation elevated. The critical question is whether April represents a genuine turning point or a one-month blip driven by fuel price normalisation.

The monthly CPI indicator is not the same as the quarterly CPI. The RBA's primary inflation measure remains the quarterly CPI, with the next full quarterly print due in late July 2026 for the June quarter. The June quarter CPI will be the decisive data point for the August RBA meeting — and arguably the most important economic release of the year for mortgage holders.

April Monthly Change

-0.1%

Seasonally adjusted

Trimmed Mean Annual

3.4%

Down from 3.5% March

Headline Annual

~4.4%

Est. based on monthly

RBA Target Band

2-3%

Not expected until mid-2027

Inflation Trend: Headline CPI vs Trimmed Mean, Nov 2025 to Apr 2026

The teal dot marks today's April trimmed mean reading of 3.4%, the first month-on-month decline in underlying inflation since the rate cycle began. The RBA's 3% target ceiling is shown for reference.

Source: ABS Consumer Price Index, April 2026. RBA Statement on Monetary Policy, May 2026. April headline is estimated from monthly movement.

What This Means for the June 16 RBA Decision

The next RBA Monetary Policy Board meeting is scheduled for 16 June 2026. The April CPI data, while mildly encouraging, is unlikely to change the Board's calculus materially. Trimmed mean inflation at 3.4% is still 0.4 percentage points above the top of the target band. The RBA's own Statement on Monetary Policy in May described risks as "tilted to the upside" and noted the Board would need to see sustained progress before any policy reversal.

CBA economists, who called the hold correctly after May's hike, maintain that the RBA has room to pause in June. Their view is that three consecutive hikes have positioned monetary policy as "sufficiently restrictive" and that the Board will want to observe how the economy digests the cumulative 75 basis points of tightening before acting again. Labour market data, retail trade, and any further energy price developments before June 16 will matter as much as today's CPI print.

Westpac's economics team, however, revised their June forecast in early May. Originally expecting a June hike, they pushed the next move to August, citing the need for confirmation from the June quarter CPI before committing to further tightening. Their forecast remains two more hikes — August and September — taking the cash rate to 4.85%, a level not seen since the GFC.

June 16 RBA decision: what each outcome means

Hold at 4.35% (most likely)

CBA base case. Markets would interpret this as a dovish signal, potentially easing fixed rates. Variable rates stay where they are. The next key date becomes the June quarter CPI in late July.

~65%

Hike to 4.60%

Westpac's original call, now revised away. Would add ~$83-156/month depending on loan size. Would likely push auction clearance rates lower. The market has ~35% probability of this outcome priced.

~30%

Cut (no chance)

With inflation at 3.4% trimmed mean, a June cut would require an extraordinary deterioration in the employment or growth data that has not materialised.

~0%

Three Rate Scenarios and When Relief Could Come

The chart below shows three cash rate paths from today through end-2027. All three scenarios lead to rate cuts eventually, but the timing and the peak rate differ significantly — and those differences translate directly into mortgage repayment relief for Australian homeowners.

RBA Cash Rate Scenarios: Hold, Westpac Two-Hike Path, and Market Pricing

All three scenarios eventually show cuts in 2027. The question is how high rates go first and how long they stay elevated. Green dashed = CBA hold. Red = Westpac 4.85% peak. Amber = market pricing (~4.70% peak).

Source: CBA Economics (May 2026), Westpac IQ (May 2026 rate call revision), RBA Statement on Monetary Policy May 2026 (market-implied path). Scenarios are illustrative, not guaranteed outcomes.

Under the CBA hold scenario, borrowers get no further pain but also no relief until 2027. Under Westpac's two-hike path, a $600,000 mortgage holder would pay approximately $250/month more than today before cuts begin. In any scenario, meaningful rate relief, defined as the cash rate returning to or below 4.00%, is at least 18 months away.

What Each Scenario Costs Your Mortgage

Australian borrowers on variable rates have already absorbed $375-$625 per month in additional repayments since the three-hike cycle began in February 2026. The chart below shows what the current rate, one additional hike, and two additional hikes mean for monthly repayments at different loan sizes — using a standard 25-year principal-and-interest loan at prevailing variable rates.

Monthly P&I Repayments by Loan Size: Current vs One Hike vs Two Hikes

Based on SVR of 8.9% (current), 9.15% (one hike), 9.4% (two hikes). P&I repayments over 25 years. Each additional 0.25% hike adds $83-207/month depending on loan size.

Estimates based on standard variable rate (SVR) of 8.9%. Actual rate paid depends on your lender discount, LVR, and loan type. Speak to a broker for a personalised comparison.

Best case: RBA holds at 4.35%

Repayments stay where they are. No new pain, but no relief either until 2027. Suitable borrowers: those who can comfortably service current repayments and are waiting for cuts.

Moderate case: one more hike (4.60%)

Add $83-156/month depending on loan size. Total post-Feb 2026 increase: $333-$625/month on $400k-$750k. Hardship provisions become more relevant for stretched borrowers.

Westpac case: two hikes to 4.85%

Add $166-$312/month on top of current repayments. $600k mortgage holders paying $541/month more than January 2026. If this scenario unfolds, refinancing to a lower-rate lender becomes critical.

What to do regardless of which scenario

Review your current rate now. The average variable borrower is 0.5-1.0% above the sharpest competitive rates available. A broker review costs nothing and could save $300-500/month immediately, in any rate scenario.

Key Dates to Watch Before the June Decision

27 May 2026April monthly CPI indicator released (today). Trimmed mean 3.4%, monthly -0.1% seasonally adjusted.

5 Jun 2026April labour force data (ABS). Unemployment at 4.3% in March — any deterioration here reduces hike probability.

16 Jun 2026RBA Monetary Policy Board decision (2:30pm AEST). Hold widely expected; minority case for hike remains.

30 Jun 2026End of financial year. Investor activity around property typically picks up post-EOFY.

Late Jul 2026June quarter CPI — the most critical data release of 2026 for the August RBA decision.

11 Aug 2026RBA August meeting. Westpac forecasts hike here if June quarter CPI remains elevated. CBA forecasts hold.

Frequently Asked Questions

The April 2026 monthly CPI indicator showed annual trimmed mean (underlying) inflation of 3.4%, down slightly from 3.5% in March. Headline annual inflation is approximately 4.4%. The RBA's target is 2-3%. Inflation is not expected to return to the target band until mid-2027.

Most economists say no. CBA forecasts rates hold at 4.35% through the rest of 2026, with cuts beginning in 2027. Westpac is more hawkish, forecasting two more hikes (to 4.85%) in August and September 2026, then cuts in mid-2027. In all scenarios, rate cuts are at least 12-18 months away.

The next RBA Monetary Policy Board meeting is on 16 June 2026, with the decision announced at 2:30pm AEST. The majority of economists and market pricing suggest the RBA will hold the cash rate at 4.35%, though approximately 30-35% of market pricing implies a hike to 4.60%.

Three options: (1) Refinance to a lower rate — the gap between your existing SVR and the sharpest competitive rates is often 0.5-1.0%, saving $150-400/month on a $600k loan. (2) Switch to interest-only temporarily — reduces repayments but increases total interest paid. (3) Extend the loan term — reduces monthly payments but extends the debt. A broker can model all three for your specific situation.

Raj Bhangu

Principal Mortgage Broker, iSmart Finance Group

Licensed Mortgage BrokerCredit Representative 481761FBAA Member

Raj Bhangu monitors RBA decisions, inflation data, and lender rate movements to give Australian borrowers timely, practical guidance on managing their mortgage in a changing rate environment.

Sources & References

This article references information from the following authoritative sources:

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