Bendigo Bank has made a bold shift in economic forecasting, signalling a third interest rate hike for 2026.
Chief economist David Robertson said in a statement today while the bank believes the Reserve Bank of Australia will hold the cash rate steady at its May meeting, the persistent pressures of the “fascinating, but challenging” economic environment will force their hand soon after.
“We predict a hold in May, but with a likely third hike for 2026 in August,” David Robertson said.
“Ultimately, the RBA will need to decide in early May if the oil crisis and related disruptions will see supply and demand dangerously out of kilter, or if they can look through some of the data and not risk pushing the economy into recession.”
The RBA in its March meeting hiked up the rate by 0.25 per cent leaving the cash rate at 4.1 per cent.
Major banks including ANZ, CommBank and NAB have predicted another 25 basis point rise in May.
According to Mr Robertson, this change in direction was driven by a resilient labour market, which has now been complicated by ongoing conflict in the Middle East.
The bank warned until the Strait of Hormuz is fully open, elevated prices and restricted supplies of industrial by products will continue to act as a “domino effect” on inflation.
“All energy crises comes with the risk of stagflation,” Mr Robertson said.
The announcement follows the bank’s call to sack a significant portion of its workforce.
The lay-offs followed the signing of multimillion dollar, long term partnership deals with global technology firms, Infosys and Genpact.
These agreements, spanning seven and six years respectively, are intended to “bring deep expertise in process optimisation and delivery” and “drive greater productivity and support stronger risk management”, the bank announced on Wednesday.
Following this news, the Australian stock market responded with a wave of optimism as the bank was one of the top performing stocks, up 8.41 per cent.
The bank’s cash profits, at $138 million for the March quarter, also beat market expectations by 12 per cent.
