Big four Australian banks predict RBA rate rise to 4.60% in September

With a September move roughly 90% priced in, the actual hike is not expected to jolt the Australian dollar or the short end of the curve, while a pause would be the greater surprise. Market reaction will likely hinge on the statement and the voting pattern, as the banks disagree on whether the decision will be unanimous and on whether the Board hints at further action. A clear signal of another increase would bolster the currency and weigh on rate-sensitive areas like housing stocks, whereas a dovish tone would have the opposite effect. Oil price moves are also key, as rising fuel costs are adding to inflation pressures, while an easing of Middle East tensions would reduce that factor.

---

Earlier:

• UBS expects two additional RBA rate increases to a terminal rate of 4.85% following Bullock's remarks

---

The four major Australian banks are now in agreement that the RBA will raise rates on September 29, but they diverge on the vote unanimity and the extent of subsequent tightening.

Summary:

• All four banks — Commonwealth Bank, Westpac, NAB and ANZ — now predict the RBA will increase the cash rate by 25bp to 4.60% at its September 28–29 meeting.
• The change in forecasts comes after Governor Michele Bullock told a parliamentary committee on Friday that several upside inflation risks identified in August seem to be materialising.
• CBA points to oil near $100, stronger-than-expected July CPI and GDP, and hawkish RBA messages, and anticipates a unanimous vote with hawkish language. Market pricing for a September hike has climbed to about 90% from roughly 30% prior to the July CPI release.
• Westpac argues that hawkish rhetoric overrides tactical reasons for delaying until November, yet expects a divided vote due to disagreements on supply capacity, labour supply, and labour market slack.
• CBA notes the possibility of an additional hike to 4.85% if the September quarter trimmed mean inflation comes in at 1% or above, and has delayed its expected rate cuts to August and November 2027.
• Westpac also highlights a risk of a further increase and would adjust its August 2027 start date for cuts if that becomes its base case.

The four major Australian banks now all predict a 25bp RBA rate rise to 4.60% (from 4.35%) at the September 28–29 meeting, following Governor Michele Bullock's Friday comment that certain upside inflation risks from August look to be materialising. Market pricing has responded, with a September hike now about 90% priced in, per CBA, up from around 30% before the July CPI data.

In a Monday note, Belinda Allen, CBA's head of Australian economics, stated that the bank has advanced its expected hike from November. She attributed this to a combination of factors: Brent oil rising to roughly $100 from about $80 in three weeks, propelled by damage to Saudi Arabia's East-West pipeline, Houthi activity, and restricted Strait of Hormuz traffic. She also noted stronger-than-expected July CPI and GDP, along with hawkish remarks from RBA Deputy Governor Hauser, Assistant Governor Hunter, and Governor Bullock. CBA foresees a unanimous decision with hawkish language in the post-meeting statement, and noted that arguments for a hold will receive attention given the slowing economy, falling home prices, and a more balanced labour market.

Luci Ellis, Westpac's chief economist, also moved her forecast to September, stating that the Governor's comment satisfied the condition the Board established in August for additional hikes. She noted tactical reasons for delaying, such as the August monthly CPI release the day after the meeting, and the chance that Middle East de-escalation, a fuel excise change, or a weak labour report could produce inconvenient optics. She decided that the hawkish rhetoric prevails over those factors. Westpac anticipates a divided vote, citing divergent views on trend productivity, labour supply, and labour market slack, with underemployment having increased significantly.

NAB's economists had previously predicted a September increase, with the risk leaning toward an additional rise in November if activity data remain resilient. ANZ has also shifted to September and expects another hike in November, having earlier said that a September move would be a hawkish sign pointing to further tightening.

Looking beyond September, CBA stated that the risks are toward higher rates, and a robust September quarter trimmed mean reading of 1% or more could prompt the RBA to raise the rate to 4.85%. Its base case remains a single hike, and it has postponed its expected rate cuts to August and November 2027, from May. Westpac also sees a risk of a follow-up rate increase and would revise its August 2027 start for cuts if that becomes its base case.

-

All four banks are now aligned on the timing but diverge on the vote and the subsequent path, meaning the statement and vote split may be more significant for markets than the rate decision itself. Fuel remains a key pressure point, with ABC reporting diesel at about $3 per litre or higher, more than double its level at the beginning of the year. Upcoming indicators include the labour force data this week, the monthly CPI release the day after the meeting, the September quarter CPI, and oil and Middle East news.