Citi Forecasts Two More RBA Rate Hikes in 2026, Warns ASX Investors

The Quick Take

• Citi forecasts two more RBA interest rate hikes in 2026, warning ASX investors and mortgage holders to prepare for further tightening
• The RBA has already raised rates multiple times this cycle; additional hikes would extend one of Australia's most aggressive tightening cycles
• Rising rates threaten Australian property valuations and household disposable income, with knock-on effects for consumer spending

Citi has forecast two additional Reserve Bank of Australia interest rate hikes in 2026, a projection that would extend an already aggressive tightening cycle and place further pressure on Australian mortgage holders, property valuations, and ASX rate-sensitive sectors. The Motley Fool Australia reported on the forecast, which is consistent with broader global central bank trends where persistent inflation is forcing continued policy tightening despite slowing economic growth.

For Australian investors and homeowners, two additional rate hikes represent a significant further tightening of financial conditions. Australia's household sector is among the most leveraged to variable-rate mortgages globally, meaning each 25bp RBA increase translates almost immediately into higher monthly repayments. The property markets in Sydney and Melbourne, which had begun to stabilise, would face renewed price correction risk as debt serviceability deteriorates for marginal buyers and investors.

ASX investors should watch the RBA's October and November board meetings as the next potential inflection points. Australian Q3 CPI data — due late October — will be the key domestic data release determining whether Citi's forecast holds. A CPI print showing inflation decelerating faster than expected could push the RBA to pause rather than hike twice as forecast. Bank stocks face a mixed outlook: net interest margins benefit from higher rates, but loan impairments rise as mortgage stress builds at the household level.

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