ANZ has become the first major bank to forecast back-to-back cash rate rises, with Westpac and CBA now expecting the RBA to lift rates at its September meeting.
Australia and New Zealand Banking Group (ANZ) has become the first major bank to forecast back-to-back cash rate rises, with Westpac and the Commonwealth Bank of Australia (CBA) joining the National Australia Bank (NAB) in expecting the Reserve Bank of Australia (RBA) to lift rates at its September meeting.
ANZ on Monday (21 September) revised its outlook to include a 25-basis-point increase in September and another 25-bp rise in November, which would take the cash rate to 4.85 per cent, a level not seen since 2008.
The change marks a more hawkish stance than its major-bank peers, with Westpac and CBA both moving to bring forward their forecasts for one further 25-bp increase from November to September.
The convergence leaves all four major banks expecting a rise at the RBA’s 28–29 September Monetary Policy Board meeting.
ANZ sees higher end point
ANZ said it had added another rise to its official forecast after the escalation of conflict in the Middle East and the accompanying lift in oil prices changed the inflation outlook.
“The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflationary shock than a growth shock suggests that a single 25bp rate hike in November, after the quarterly Consumer Price Index (CPI) data are released, is no longer the most likely outcome,” the bank said.
The bank noted that it believed “the September vote is likely to be split”.
ANZ also pointed to the RBA’s recent public communications, saying that the central bank had not sought to temper increasingly firm market expectations of an imminent increase.
“The RBA has also had a range of opportunities over the past week, through its public communications, to pull back expectations of a near-term rate hike. To date, it has chosen not to,” ANZ said.
“We also view a move in September as an addition to, rather than a replacement for, a November rate hike.
“That revealed preference for moving in SMP meetings, and the already restrictive cash rate stance suggests that a decision to increase rates in September is less about timing and more about the ultimate level of rates that the RBA thinks will be necessary to bring inflation back to target in a timely fashion.”
Westpac brings call forward
Westpac chief economist Luci Ellis said the bank had shifted its expected next rise to September from November after recent RBA commentary became more hawkish on inflation risks.
“Communication has clearly escalated over recent days. In particular, Governor Bullock flagged that upside risks to inflation appeared to be materialising,” Ellis said.
While Westpac expects a September rise, it anticipates a divided board, with the chief economist noting that members could hold different assessments of the economy’s productive capacity and the degree of slack in the labour market.
“We continue to expect a split vote at the meeting,” she said.
Westpac has not added a second rise to its base case, but Ellis said the prospect remained live and could change the outlook for eventual rate cuts.
“There is a risk of a follow-up hike. Much depends on the data flow after the meeting,” she said.
CBA cites oil, markets, and messaging
Meanwhile, CBA’s head of Australian economics Belinda Allen said the lender now expected a 25-bp rise to 4.60 per cent at the September meeting, bringing forward its previous November call.
“Oil prices and the conflict in the Middle East have shifted significantly over the past three weeks,” she said.
“At the time of our call change Brent oil was closer to US$80 a barrel and now is sitting at above US$100 a barrel. Higher diesel and petrol prices locally do raise the risk of higher inflation in Australia both immediately and through second round pass through.”
CBA also noted a sharp repricing in financial markets, with September nearly fully priced after the July CPI data.
“September is now ~90 per cent priced, compared to ~30 per cent before the release of the July CPI,” she said.
“Market pricing alone won’t drive the board to hike but it does raise the risk that its inflation fighting credibility would be eroded if it did not hike.”
Allen said the combined effect of higher oil prices, market pricing, and the RBA’s increasingly inflation-focused messages had shifted CBA’s base case and that the bank viewed a follow-up hike as increasingly likely.
“The risks sit with the need for another rate hike given the persistence in domestic sources of inflation, but this is not yet our base case,” Allen said.
Bullock flags inflation threat
The banks’ reassessments follow governor Michele Bullock’s 18 September appearance before the parliamentary economics committee, where she said inflation remained too high despite softer economic growth and 75-bp tightening over 2026.
Bullock said the RBA’s concerns had intensified since its previous assessment, citing the Middle East conflict, the AI investment boom, and extreme weather as sources of renewed cost pressure.
“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising,” she said.
As at 18 September, the ASX 30-day interbank cash-rate futures October 2026 contract was trading at 95.44, indicating an 86 per cent expectation of a 25-bp September rise to 4.60 per cent.
[Related: IMF says rate hikes needed, calls for further housing reform]
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