Three Australian Banks Now Expect Another RBA Rate Hike
After a hot inflation print, three of Australia's big four banks now expect the RBA to hike rates again, with NAB seeing a September rise.
The Commonwealth Bank of Australia (CBA) and National Australia Bank (NAB) have joined ANZ in forecasting another interest rate hike from the Reserve Bank of Australia (RBA) this year. The shift in outlook follows a hotter-than-expected inflation reading for July, which has raised concerns that price pressures remain entrenched in the economy.
NAB is the most aggressive in its prediction, expecting the central bank to move at its next policy meeting on September 29-30. The bank argues the risk is tilted toward an additional hike in November if economic activity remains resilient.
CBA and ANZ, meanwhile, now see a rate rise arriving in November. Westpac has yet to change its view, still expecting rates to remain on hold.
"While one monthly result needs to be interpreted cautiously, the renewed strength across a range of underlying and domestically influenced prices suggests the pace of disinflation has stalled," said Belinda Allen, head of Australian economics at CBA. "Based on recent RBA communications, we expect this upside surprise to CPI will see the RBA hike the cash rate (in November)... The risk sits with an earlier September hike."
The RBA held its cash rate at 4.35% this month for a second consecutive meeting, following three hikes earlier this year. Policymakers have repeatedly warned they would act again if inflation risks build.
Market pricing has shifted sharply in response to the data. The probability of a September hike to 4.6% is now seen at 50%, up from just 17% before the inflation release. Futures markets are now pricing in a total of 30 basis points of tightening by February next year.