RBA Meeting Expectations: Rates Held, Messaging Key

With the next RBA meeting on the horizon next week, markets will be looking at the central bank not necessarily for the decision itself, but the clues it may give in commentary for future periods. That being so, one notable analyst has come out to suggest that markets may be underestimating the chances of a rate move.

Although the chances of a rate cut are effectively priced at 0 by markets, and a rate hike not more than 2%, the messaging will hold the key. Macquarie’s equity strategy team is urging markets to brace for a more hawkish Reserve Bank of Australia than currently priced, arguing futures significantly underestimate the probability the central bank keeps a rate increase firmly on the table at its 16 June policy meeting.

Other leading banks such as NAB, ANZ, and Commonwealth Bank have forecast that rates will stay flat at 4.35% through the remainder of 2026, with Westpac continuing to price two more rate hikes this year.

Expected Messaging

The call comes as Macquarie assigns a 55 percent probability to a hawkish hold next week, with their proprietary RBA tone model flashing readings well above neutral and more closely resembling past tightening episodes than periods preceding easing cycles. The firm’s pre-meeting tone indicator sits at plus 39.5, with Governor Michele Bullock’s 4 June Senate testimony scoring as hawkish across eight of ten communication components tracked by the model.

Current market pricing reflects just one additional RBA hike in the cycle, a view Macquarie considers too sanguine given the central bank’s recent rhetoric and the global policy backdrop. The firm’s tone analysis reveals a 67 percent correlation between current RBA language and historical “another hike” periods, contrasted sharply with a negative 24 percent correlation to “first cut” episodes.

Beyond domestic factors, Macquarie highlights a critical global constraint on the RBA’s room to pivot dovish. Ten of eleven developed-market central banks are now priced for additional tightening, with net global hikes resuming in May after a brief pause. This synchronised hawkish shift across advanced economies limits the RBA’s flexibility to signal early easing without risking currency weakness and imported inflation pressures that could undermine its credibility.

The firm’s detailed probability breakdown for the 16 June meeting assigns hawkish hold at 55 percent, balanced hold at 22.5 percent, mildly dovish hold at 12.5 percent, very hawkish including an actual hike at 7.5 percent, and very dovish at just 2.5 percent. The distribution skews meaningfully more hawkish than standard futures pricing captures, which tends to focus on binary hike versus hold outcomes rather than communication tone.

From a positioning standpoint, Macquarie’s equity strategists are steering clients toward defensives, resources, and higher-for-longer beneficiaries while avoiding real estate investment trusts, consumer cyclicals, and long-duration growth stocks until the RBA stops actively pushing back against easing expectations. The call reflects a view that rate-sensitive sectors face extended headwinds from both higher discount rates and potential valuation compression as markets reprice the policy outlook.

Within the preferred basket, resources benefit from nominal growth dynamics and commodity pricing resilience in an environment where inflation concerns remain elevated globally. Defensives including healthcare, staples, and utilities offer earnings stability regardless of growth trajectory. Higher-for-longer beneficiaries such as insurers stand to gain from sustained investment income on float, while certain banks may see net interest margin support, though credit quality bears watching as rates stay elevated.

Conversely, REITs face a double headwind from higher discount rates compressing valuations and tighter capitalisation rates across property markets. Consumer cyclicals confront pressure from mortgage stress and constrained discretionary spending as households adjust to prolonged elevated borrowing costs. Long-duration growth names, particularly high-multiple technology and early-stage companies, remain most vulnerable to discount rate assumptions that underpin stretched valuations.

The Shape of Rate change

Macquarie also sounds a cautionary note about the nature of eventual rate cuts when they do materialise. The firm warns that easing driven by weakening growth represents a very different trade from the benign cuts equity markets often anticipate. Growth-driven cutting cycles historically arrive alongside earnings per share downgrades, creating initial headwinds for cyclicals and high-beta names even as policy loosens. The message is clear: be careful what you wish for, as RBA cuts triggered by economic deterioration would not prove equity-friendly in the near term.