RBA Rate Hike Expected Despite Jobless Uptick

The major banks in Australia remain confident that the Reserve Bank of Australia (RBA) will increase the cash rate by 25 basis points at its meeting on September 29, despite a slight uptick in unemployment.

The RBA's inflation concerns are seen as a bigger priority than the jobless numbers, with a consensus among the big four banks that the latest labour-force figures point to a gradual easing in labour-market conditions, but do not yet provide enough evidence of a broader slowdown.

According to the National Australia Bank (NAB), the result is 'taken at face value' as signalling a less tight jobs market than policymakers had anticipated, but the bank stresses that the RBA's renewed emphasis on bringing inflation to target means a September rise remains its central case.

The Commonwealth Bank of Australia (CBA) and Westpac have also preserved their forecast for a cash rate hike in September, while ANZ retains its prediction of back-to-back hikes.

Markets are pricing in further quarter-point increases in November and December, which would see the cash rate reach 5.10 per cent - above its level at any point since December 2008.