NAB Morning Call RBA suggests a longer road to lower inflation
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Feb 3, 2026 Skye Masters, NAB markets economist who explains monetary policy and market moves, walks through the RBA’s sharper tone and its pushback of the inflation return timeline. Markets reacted with a stronger Aussie, softer equities and higher bond yields. They cover risks from broader inflation, possible further rate moves, housing approvals, China services PMI and upcoming US and European data.
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RBA Sees Stronger, Broader Inflation
- The RBA raised rates to 3.85% and signalled broader, stronger inflation pressures than expected.
- The Bank now pushes the return-to-target timeline out to mid-2028, implying a longer tightening path.
Markets Reprice More RBA Tightening
- Markets moved to price further hikes, with OIS pricing ~20bp more by May and NAB forecasting another hike in May.
- The RBA's commentary and forecasts lifted expected terminal rates and weakened bets on rapid easing.
Higher Rates Feed Into Weaker Growth
- The RBA's forecast profile assumes higher cash rates, raising near-term unemployment slightly but not above 4.5% until mid-2028.
- That reflects the Bank feeding market-implied rates into growth and labour projections.