Australian Banks Forecast Another Rate Hike as Inflation Fears Rise

The Reserve Bank of Australia (RBA) may raise interest rates again this year, according to forecasts from three of Australia's major banks. The Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and ANZ all predict a rate hike in November, following the latest inflation print. This news has increased market expectations of a September rate rise, with some predicting a 50% chance.

CBA head of Australian economics Belinda Allen said that recent RBA communications suggest an interest rate increase is likely in response to the stronger-than-expected inflation data. The RBA held rates steady at 4.35% this month but has warned that it would hike again if inflation risks build.

The banks' forecasts come despite Westpac's continued view that rates will remain on hold from here. The market now sees a 50% chance of the RBA hiking interest rates to 4.6% in September, up from just 17% before the inflation data was released.