ANZ's change of mind comes on the back of new inflation data released on Wednesday, showing underlying consumer prices rose faster in January than they did in December.
The ABS’ Consumer Price Index (CPI) showed trimmed mean inflation - the RBA’s preferred measure that excludes certain volatile prices - rose from 3.3% over 2025 to 3.4% over the year to January.
That was higher than most economists predicted and saw inflation even further from the central bank’s 2% to 3% target band.
The RBA’s only weapon to impact inflation is to change the cash rate, reducing it to encourage price growth and increasing it to lessen price growth.
“With a series of upward inflation shocks over recent quarters and less deceleration in the January trimmed mean than we expected, we now see the most likely path of policy being a 25 basis point rate hike at the May RBA Board meeting,” ANZ head of Australian economics Adam Boyton said.
But a second 2026 rate hike is still far from set in stone.
Mr Boyton noted arguments for a May hike aren’t as “clear cut” as some suggest and that the central bank appears “in no hurry to push rates higher”.
Speaking at a Melbourne University dinner on Wednesday, RBA governor Michele Bullock said she expects the central bank “will have to be patient”.
“Inflation is a bit elevated. I don’t think we think it’s taking off again, but it’s a little bit elevated,” she said.
"The economy is sort of recovering, and this is where it's difficult - the jugdements are a little bit more difficult."
It’s also worth noting that the impact of the February rate hike is only just starting to flow through to mortgage-holders.
When a lender increases interest rates, borrowers start accruing interest at the new rate immediately, but the first repayment reflecting the higher rate may not be due for several weeks.
Additionally, while all of the big four banks now forecast a May rate hike, none expect the RBA to shift the cash rate when it meets next month.
The January CPI data is the first of three monthly reads that will make up the quarterly figure, with the collection to be completed in late April.
“There is also a clear preference on the part of the RBA’s monetary policy board to adjust policy at statement of monetary policy meetings following the release of the quarterly Consumer Price Index," Mr Boyton said.
The latest SOMP, released alongside news of the RBA’s February hike, shows trimmed mean inflation is expected to rise to 3.7% by mid-2026 before sliding into the target band in mid-2027.
Finally, if the May meeting does result in a hike, ANZ is tipping that to be the last move in the hiking cycle, forecasting the cash rate to then remain at 4.1% for an extended period.
What this means for mortgage holders
If ANZ’s revised forecast proves correct and the RBA lifts the cash rate again in May, mortgage holders could see their repayments rise further.
A 25‑basis‑point hike typically adds roughly $100 a month to repayments on a $600,000, 30-year variable loan - or $1,200 per year.
That’s assuming the typical variable rate for owner-occupiers - 5.50% p.a. as of December - was lifted to 5.75% p.a. in the wake of the February rate hike and is lifted again to 6% p.a. in the event of a May hike.
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