HSBC sees an increased risk of contraction in the Australian economy and expects the Reserve Bank of Australia (RBA) to hold interest rates at their current level at its upcoming policy meeting this month, the Australian Financial Review reported Friday.

"Although there is some risk the RBA might choose to hike again beyond [June], we expect the weakening in growth to convince them to be on hold," HSBC chief economist Paul Bloxham reportedly said.

HSBC now anticipates rate cuts to start from the third quarter of 2027 with inflation forecast to decline through late 2026 and next year. The bank also expects Australia's gross domestic product to fall in the current quarter after posting only marginal growth of 0.3% in the previous quarter, according to the report.

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