TD Securities expects the Reserve Bank of Australia to lift the cash rate to a peak of 4.60% in this cycle, a view it first laid out in February and says still stands.
TD also reads the May policy statement as signalling reluctance to raise rates in June, and expects the RBA minutes to provide more clarity on how the Board approached that June decision.
Market Expectations And Rate Path
On TD’s forecast, the next increase would arrive in August, taking the cash rate to a 4.60% peak.
The article notes it was produced using an artificial intelligence tool and checked by an editor.
Looking back to our discussions in 2025, we similarly believed the RBA would ultimately need to lift the cash rate to 4.60%, and we also pencilled in an August hike, with the main uncertainty being timing given policy messaging that suggested hesitation about moving too quickly.
That 4.60% peak never materialised, with the cash rate instead holding at 4.35% well into 2026 even as inflation has remained persistent, with the latest quarterly print at 3.6%, still above the RBA’s 2–3% target band, alongside a labour market that has stayed tight with unemployment a little over 4%.
Trading Implications For Rates Volatility
This combination is pushing markets to reassess the interest-rate outlook: derivatives that had leaned toward cuts later this year are now assigning a small but rising chance of one final hike, with ASX 30 Day Interbank Cash Rate Futures implying roughly a 40% probability of a 25 bp hike by September.
For traders, that shifts the balance of risk from the timing of cuts to the possibility of a last hike, making long volatility exposures in rates (for example, via options structures that benefit from higher short-end rate swings) potentially prudent ahead of the RBA minutes, where any hawkish nuance could trigger a sharp repricing in front-end swaps.
