STOCKS | Citi Now Expects Two More RBA Rate Hikes in 2026, Sees 4.85% Peak

Citi now expects the Reserve Bank of Australia to raise rates twice more in 2026 and lift the terminal rate to 4.85%. According to Sina Finance, Citi said the revision reflects a split Australian economy, with a deep housing correction offset by AI-related investment that is tightening capacity and adding inflation pressure. Citi economists including Faraz Syed wrote in a Friday note that weak productivity, a tight labor market, and elevated oil prices are likely to keep inflation stubbornly high. The analysts said the RBA needs to tighten further to curb inflation, although a dovish board may delay action. Citi raised its terminal-rate forecast from 4.60% to 4.85% and opened a new trading position, selling November overnight index swaps at 4.66% with a target of 4.85%. The bank said markets are underpricing the risk of consecutive RBA rate hikes and that such moves are necessary to control inflation.