The Reserve Bank of Australia (RBA) has signalled the possibility of further interest rate hikes following its September meeting, with minutes described as 'hawkish' by major banks like ANZ and the Commonwealth Bank of Australia (CBA). The RBA cited mounting global cost pressures, stronger-than-expected inflation, and greater domestic capacity constraints as key concerns. Members noted that inflation remained too high and that the August forecasts predicted inflation returning to the 2-3 per cent target range only by late 2027, contingent on slower economic growth and improved productivity.
The minutes highlighted escalating risks, including the Middle East conflict and the global AI boom, which threatened to exacerbate inflation. The RBA also pointed to unexpectedly strong domestic inflation readings and businesses passing higher costs to consumers. While monetary conditions were restraining activity, members questioned whether the restraint was sufficient. The board outlined three principal arguments for the September rate hike, including the deterioration in the inflation outlook and the risks of delaying action.
The RBA acknowledged the growing challenge of balancing inflation and employment objectives due to global cost pressures. Members reaffirmed their commitment to returning inflation to target while preserving employment gains, but conceded that persistent supply disruptions could increase the economic cost. The closing statement left the door open for further rate hikes if necessary.
ANZ and CBA offered differing views on the November decision. ANZ maintained the likelihood of another rate hike in November, while CBA retained its forecast of an extended hold. Both banks noted the hawkish tone of the minutes, contrasting it with Governor Michele Bullock’s subsequent press conference, which was seen as more dovish.