Banks, insurance companies and miners are tipped to be among key winners on the ASX if the Reserve Bank raises official interest rates next year, a scenario money markets have priced in after higher-than-expected inflation figures.
As the Reserve Bank prepares to hold its final board meeting of 2025 on Tuesday, markets are predicting the current cash rate of 3.6 per cent will not change this year, with some betting on an increase in rates in 2026.
Markets are predicting the current cash rate of 3.6 per cent will not change this year.Credit: Getty Images
Experts said that any such increase in interest rates could help to widen banks’ profit margins, while insurance companies also tend to make higher returns from their investment portfolios when interest rates rise.
Miners could also be viewed more favourably in an environment of rising rates, market watchers said, while adding that real estate stocks and infrastructure were more likely to struggle.
Michael McCarthy, a market strategist at online share trading platform Moomoo, said he thought interest rates would be kept on hold on Tuesday and rise early in the new year, and that banks and companies with lower debt or clean balance sheets would be best positioned.
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“The political environment at the moment may not be conducive to it, but banks are the traditional beneficiaries of interest rate movements because they give them an opportunity to increase their margins,” he said.
Meanwhile, companies that tend to rely on more borrowing, such as those in infrastructure and real estate investment trusts, will probably feel the squeeze as interest rates rise or stay higher, McCarthy said.
Financial markets have priced in one RBA rate rise over 2026 after the monthly consumer price index showed inflation rose to 3.8 per cent in the year to October, up from 3.6 per cent in September. The RBA targets inflation of 2 to 3 per cent, and various bank economists have recently changed their forecasts, no longer predicting cuts from the RBA.
