Former Australian deputy treasurer: The Reserve Bank of Australia may reconsider raising interest rates next year.

The Chief Economist of the Commonwealth Bank of Australia, Luke Yeaman, stated that if inflationary pressures remain high and the labor market continues to tighten, the Reserve Bank of Australia may raise interest rates next year. Yeaman, who previously served as the Deputy Minister of the Australian Treasury, said in a research report on Tuesday, "We will continue to maintain a pace that matches the economic growth, so the central bank committee will remain highly vigilant and the possibility of interest rate cuts will not be on the agenda. If the economic momentum exceeds our expectations, there may be a possibility of a rate hike in 2026." Although the possibility of another rate hike by the Reserve Bank of Australia is still low, weak productivity has lowered Australia's potential economic growth rate, which means that inflation may appear more quickly when economic activity strengthens. Yeaman stated that this means borrowing costs will need to be higher than in previous cycles, making him one of the few economists who believe that the easing cycle of the Reserve Bank of Australia is coming to an end. Since February, the central bank has cut key interest rates three times, bringing them down to 3.6% the lowest level since April 2023. After inflation in the third quarter exceeded the upper limit of its 2-3% target range, the central bank instead adopted a data-based policy stance. Market pricing indicates a low likelihood of further rate cuts, while economists predict that loose policies will resume in May 2026. Yeaman stated that if the inflation rate in the fourth quarter (to be announced at the end of January) is higher than 0.8% (the inflation rate for the previous three months was 1.3%) and the trend of the unemployment rate is declining (currently at 4.4%), then the possibility of a rate hike in 2026 will be reconsidered. Traders and economists will closely monitor the monthly inflation report to be released on Wednesday, with main data expected to further rise to 3.6%. The less volatile "moving average" data is also expected to rise to 2.9%.