Australian Banks Predict Rate Hikes Amid Persistent Inflation

Three of Australia's four major banks are predicting rate hikes before year's end due to persistent inflationary pressures. The dramatic turnaround follows Wednesday's consumer price index (CPI) release, which showed that inflation is still above the Reserve Bank of Australia (RBA) target range of 2% to 3%. ANZ was the first bank to forecast a rate hike, followed by National Australia Bank (NAB) and Commonwealth Bank of Australia (CBA), all expecting a 25-basis-point increase.

NAB expects a September hike, while CBA and ANZ are forecasting an increase in November. Harry Ottley, an economist at CBA, said that the RBA will 'basically have to hike' due to strong inflation data. The RBA Governor Michele Bullock has warned that interest rates may be raised again if inflation doesn't come down quickly enough.

However, Westpac is the outlier among major banks, forecasting that rates will remain on hold through the end of the year and expecting a cut midway through 2027. Its Senior Economist Justin Smirk pointed to new housing and rental costs coming in broadly as expected, while surprise increases were concentrated in areas such as cars and household goods.