Three of Australia's Big Four Banks Now Expect Another Rate Hike This Year
SYDNEY, Aug 27 (Reuters) - Three of Australia's four biggest banks now expect the Reserve Bank of Australia to lift interest rates again this year, after a hot inflation reading reignited fears that price pressures are not cooling quickly enough.
The Commonwealth Bank of Australia and National Australia Bank on Thursday joined ANZ in forecasting another increase, with NAB going furthest by raising the possibility of a move at the central bank's Sept. 29-30 policy meeting. NAB said the risk was also tilted toward an additional hike in November if economic activity remained resilient.
CBA and ANZ both moved to expectations of a November rate rise after July inflation data, while Westpac has yet to change its view that rates will remain on hold from here.
"While one monthly result needs to be interpreted cautiously, the renewed strength across a range of underlying and domestically influenced prices suggests the pace of disinflation has stalled," said Belinda Allen, head of Australian economics at CBA. "Based on recent RBA communications, we expect this upside surprise to CPI will see the RBA hike the cash rate in November... The risk sits with an earlier September hike."
The RBA has kept the cash rate at 4.35% through its last two meetings after raising it three times earlier this year. Policymakers have consistently warned they would act again if inflation risks build, and markets were quick to respond to the latest data.
Interest rate futures now imply around a 50% chance of a hike to 4.60% in September, up sharply from just 17% before the inflation report. A total of 30 basis points of tightening is now priced in by February next year.
The shifting expectations highlight the delicate position facing the RBA: inflation has slowed over the past year, but renewed strength in underlying and domestically driven prices suggests the final stretch of the fight could be more difficult. Another hike would also deepen cost pressures on Australian households already carrying heavy mortgage burdens, even as the central bank tries to steer inflation back to its 2-3% target.
(Reporting by Renju Jose and Stella Qiu in Sydney; Editing by Muralikumar Anantharaman)