Australia’s 10-year government bond yield rose to around 4.73%, hovering near a more than two-year high, supported by hawkish signals from the Reserve Bank. The central bank kept its cash rate unchanged last week and indicated that its brief easing cycle has ended, while flagging the potential for a return to interest-rate hikes in 2026 if inflation pressures prove stubborn. Economists now forecast at least one rate increase next year, though they caution that stronger growth momentum and more persistent inflation could warrant a more extended tightening cycle. They also noted that weak productivity has reduced Australia’s potential growth rate, increasing the risk of faster inflation as activity strengthens and keeping borrowing costs higher than in past cycles. The probability of a February hike is nearly 30%, while the chance of a May increase is around 80%. Investors now turn to next week’s RBA minutes for further insight into the latest policy decision.
