Citi forecasts 2 RBA rate hikes in 2026, February followed by May, as inflation risks rise

"Citi's outlook on Australian monetary policy signals an increasing concern over inflation risks, particularly given the current conditions in the labor and housing markets. Their prediction of rate hikes reflects a notable shift in market sentiment, emphasizing the potential volatility ahead as traders adjust expectations based on incoming economic data. The rapid recalibration by investors suggests a heightened sensitivity to inflation developments, making the Australian dollar susceptible to shifts in sentiment. Policymakers are thus in a precarious position; failing to act decisively could lead to entrenched inflation expectations, complicating monetary policy down the line. The implications of these forecasts extend beyond just interest rates, affecting consumption and investment decisions within the broader economy."