{"id":438246,"date":"2026-09-17T07:56:01","date_gmt":"2026-09-17T00:56:01","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/imf-says-rba-may-need-more-hikes-as-it-urges-australia-to-cut-spending-438246\/"},"modified":"2026-09-17T07:56:01","modified_gmt":"2026-09-17T00:56:01","slug":"imf-says-rba-may-need-more-hikes-as-it-urges-australia-to-cut-spending","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/imf-says-rba-may-need-more-hikes-as-it-urges-australia-to-cut-spending-438246\/","title":{"rendered":"IMF says RBA may need more hikes as it urges Australia to cut spending"},"content":{"rendered":"<div>\n<p dir=\"ltr\">The IMF&#8217;s warning adds institutional weight to what markets are already pricing, an <a href=\"https:\/\/investinglive.com\/central-banks\/rba-weighing-further-rate-rise-this-month-as-dep-gov-hauser-cites-three-headed-risk\/\" rel=\"follow\">RBA hike as soon as September 29,<\/a> and reinforces AUD support at the margin given the fund is flagging upside inflation risk rather than downside growth risk as the dominant concern. The bigger swing factor for the Aussie near term is energy prices rather than the IMF statement itself, given Brent&#8217;s 35% surge since early August on the worsening Middle East conflict is the direct channel the IMF says could force the RBA&#8217;s hand through second round inflation effects. With the Fed also having just hiked, a hawkish RBA move would keep Australia in step with a broader global tightening pulse, which should be a supportive combination for AUD crosses funded in currencies where central banks are seen as closer to done.<\/p>\n<p dir=\"ltr\">&#8212;<br \/>\nThe IMF is telling Australia to tighten the budget and stay ready to tighten rates further, with surging fuel prices doing much of the work behind that warning.<\/p>\n<p dir=\"ltr\">Summary:<\/p>\n<ul dir=\"ltr\">\n<li>IMF says the RBA should stand ready to hike rates further given persistent underlying inflation and uncertainty over how restrictive policy currently is<\/li>\n<li>IMF forecasts Australian GDP growth of 1.9% this year, cut to 1.6% in 2027, a downgrade it attributes to the higher chance of another RBA hike<\/li>\n<li>Key risk flagged: further spikes in global energy prices could trigger second round inflation effects requiring more tightening<\/li>\n<li>Brent crude surged 35% since early August to above $108 a barrel on Wednesday on worsening Middle East conflict; Australian core and headline CPI already topped forecasts in July<\/li>\n<li>Markets are pricing around an 80% chance of a 25bp RBA hike at its September 29 meeting, with some estimates as high as 87% and the cash rate reaching 4.85% by early 2027<\/li>\n<li>IMF also urged federal and state governments to cut spending, while largely backing Labor&#8217;s investor tax changes; mission chief Paulo Medas said the changes create more balanced incentives that could help housing affordability<\/li>\n<\/ul>\n<p dir=\"ltr\">\nThe International Monetary Fund said on Thursday that Australia&#8217;s central bank may need to raise interest rates further, warning that persistent underlying inflation pressures and uncertainty over whether financial conditions are sufficiently restrictive mean the Reserve Bank of Australia should stand ready to hike as needed. The warning came in the IMF&#8217;s concluding statement following its annual consultations with Treasury, the RBA and the Australian Prudential Regulation Authority.<\/p>\n<p dir=\"ltr\">The fund downgraded its forecast for Australian economic growth, predicting the economy will expand 1.9% this year before slowing to 1.6% in 2027, a 0.1 percentage point cut from its previous projection. It attributed the downgrade to the higher likelihood of another RBA rate increase. Inflation remains a central challenge, the IMF said, while weak productivity growth is weighing on the economy&#8217;s potential. The fund flagged a specific risk that further large increases in global energy prices could produce stronger second round effects, lifting inflation expectations and warranting additional tightening from the RBA, which targets inflation between 2% and 3%.<\/p>\n<p dir=\"ltr\">That risk is not hypothetical. Fuel prices in Australia are rising again after the worsening Middle East conflict pushed Brent crude above 108 US dollars a barrel on Wednesday, a 35% surge since the start of August. Australian consumer prices already rose more than expected in July as fuel costs jumped, with core inflation also topping forecasts. Financial markets are pricing around an 80% chance the RBA raises its 4.35% cash rate by 25 basis points at its September 29 meeting, with some estimates putting the probability as high as 87% and seeing the cash rate reach 4.85% by early 2027. The Federal Reserve&#8217;s own rate increase on Wednesday night, its first since 2023, adds to the global backdrop of tightening the RBA is weighing against.<\/p>\n<p dir=\"ltr\">Alongside its rate warning, the IMF urged Australia&#8217;s federal and state governments to cut spending, arguing more disciplined budgets would help rein in rising debt burdens and support the fight against inflation. The assessment lands as a setback for treasurer Jim Chalmers, who is already under pressure to present a convincing story on living standards and prosperity. The fund did, however, largely back the government&#8217;s changes to investor tax settings, while flagging some concerns about unintended consequences. IMF mission chief Paulo Medas said earlier consultations had identified Australia&#8217;s property tax settings, including negative gearing, as creating incentives for households to take on more leverage and invest in housing, adding to price pressures. He said the government&#8217;s budget changes had produced a more balanced set of incentives that could direct more investment toward other parts of the economy, calling it a positive change to the tax system that could help with housing affordability.<\/p>\n<p dir=\"ltr\">&#8212;-<\/p>\n<p dir=\"ltr\">More than one hike before year end is not out of the question with sticky high inflaiton.\u00a0<\/p>\n<p dir=\"ltr\">\n<p>                            This article was written by Eamonn Sheridan at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The IMF&#8217;s warning adds institutional weight to what markets are already pricing, an RBA hike as soon as September 29, and reinforces AUD support at the margin given the fund is flagging&hellip;<\/p>\n","protected":false},"author":216,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[86],"tags":[],"class_list":["post-438246","post","type-post","status-publish","format-standard","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/438246","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/users\/216"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/comments?post=438246"}],"version-history":[{"count":0,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/posts\/438246\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/media?parent=438246"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/categories?post=438246"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swingfish.trade\/blog\/wp-json\/wp\/v2\/tags?post=438246"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}