NAB has ripped up its rate outlook, while CBA and ANZ are now expecting a November hike after inflation came in hotter than expected.
National Australia Bank (NAB) has overturned its forecast for the Reserve Bank of Australia (RBA) to remain on hold, becoming the first major bank to nominate a September cash-rate increase after July’s inflation data revealed persistent underlying price pressures.
NAB announced on Thursday (27 August) that it now expects the RBA to lift the cash rate by 25 basis points (bp) at its 28–29 September meeting, taking the benchmark rate from 4.35 per cent to 4.60 per cent.
The revised outlook follows a hotter-than-expected July inflation result, which showed headline CPI easing but core price pressures failing to moderate.
NAB said the inflation outcome and the RBA’s recent communications had changed the policy calculus.
“We now expect the RBA to increase the cash rate by 25bp in September to 4.6 per cent,” NAB said.
“July CPI data showed inflation running hotter than the RBA expected in early August, and the RBA has repeatedly signalled in recent weeks that the Monetary Policy Board would act if upside risks to inflation were realised.”
NAB said the board’s willingness to consider early policy action was a significant signal following the July data release.
“However, the mention of pre-emption in this week’s Board meeting minutes underscores that there is very limited tolerance for higher-than-forecast inflation outcomes,” it explained.
November remains a live risk
While NAB’s central forecast is for a single September increase, it has not ruled out a second move in November.
“The risk is biased towards an additional hike in November, especially if activity data shows resilience in coming months,” NAB outlined.
“Yet at this stage, we look for one hike to a cash rate peak of 4.6 per cent. With policy already ‘somewhat restrictive’, another hike will take the overall policy setting more clearly into restrictive territory.”
It also places NAB ahead of the Commonwealth Bank of Australia (CBA) and Australia and New Zealand Banking Group (ANZ) in its rate hike forecasts.
Both CBA and ANZ have now abandoned their previous extended hold outlooks, and see November as the likeliest timing for a further increase.
CBA revised its outlook on Thursday (27 August), after previously expecting the RBA to leave rates unchanged through 2026.
It is now forecasting a 25bp increase in November, which would take the cash rate to 4.60 per cent.
“In the end it was the persistent inflation piece of the puzzle and our judgement of the RBA reaction function that has seen our call change come to fruition. We now expect the RBA to hike the cash rate in November by 25bp, to take the cash rate to 4.60 per cent. The risk sits with an earlier September hike,” CBA noted.
“The July CPI surprise was broader than simply a reversal of the unusually weak fuel and travel outcomes in June.”
Pointing to the RBA’s messaging, CBA said the November meeting was its central scenario, yet added that a September hike also remained in play.
“Based on recent RBA communications, we expect this upside surprise to CPI will see the RBA hike the cash rate. We see 2-3 November as the most likely meeting for the 25bp rate hike, but we cannot rule out an earlier hike on 28-29 September given recent communications,” it said.
Core inflation refuses to ease
The ABS reported on Wednesday (26 August) that annual headline CPI slowed to 3.5 per cent in July, from 3.8 per cent in June.
However, trimmed mean inflation, the RBA’s preferred underlying gauge, held steady at 3.6 per cent.
ANZ reacted to the release by dumping its extended-hold call, and instead predicting a November 25 bp increase to 4.60 per cent.
“Following the release of the July CPI data, we now expect the RBA to hike the cash rate 25bp in November,” ANZ said.
“In the minutes for the August Monetary Policy Board meeting, much of the discussion lingered on upside risks to the RBA’s updated inflation forecasts. In light of today’s inflation data, these risks are closer to crystallising.”
ANZ said the result was troubling, but not yet sufficient to make September its base case.
“While the July data were uncomfortably high, we don’t think there is a strong enough case to justify a September hike,” it said.
“This additional hike should be sufficient to slow activity enough to mitigate against further inflation risks.”
Westpac meanwhile has retained its forecast for the RBA to stay on hold through the remainder of 2026, while acknowledging that a November increase remained a risk.
“Both the labour market and wages are softer than what the RBA expected so while the risk of a November rate hike remains, this is not our base case and we expect the RBA to remain on hold this year,” Westpac noted.
[Related: ANZ tips November hike after hot inflation print]
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