NAB sees RBA hiking twice in 2026, clashing with market expectations for extended hold

National Australia Bank (NAB) has taken a more hawkish stance regarding the Reserve Bank of Australia's (RBA) outlook, forecasted two rate hikes in 2026. These are expected to occur in February and May, diverging from market expectations for a prolonged hold. Persistent inflation risks and resilience in parts of the domestic economy may push the RBA to resume tightening, despite broader expectations suggesting that policy has peaked. Money markets currently imply a 74% probability that the RBA leaves rates unchanged at its February meeting, highlighting a disconnect between bank economists and market participants. The forecast stresses risks tied to persistent inflation dynamics, as the expected hikes in February and May could necessitate rapid repricing in interest rate markets, particularly among expectations of a lengthy hold. Overall, NAB's outlook underscores market complacency regarding Australian rates, leaving investors vulnerable if inflation proves persistent. This news has recently lent support to the AUD.