Big four banks split over RBA November hike

The Reserve Bank of Australia (RBA) must now reconcile conflicting views from the country’s four largest banks on whether to raise interest rates in November. Two institutions—Westpac and ANZ—still anticipate a 25-basis-point increase, while NAB and Commonwealth Bank believe the central bank will keep rates unchanged at 4.6%.

The central bank’s shift came after inflation risks escalated, particularly due to the Middle East conflict driving global energy prices above its August projections. Westpac’s chief economist, Luci Ellis, interprets the RBA’s recent statements as signaling worries about underlying inflation persisting through the September and December quarters. She points to businesses absorbing higher energy costs and passing them to consumers, while domestic supply bottlenecks are also contributing to price pressures. Ellis states the threshold for another rate hike in November is now very low unless the conflict de-escalates or energy prices drop significantly.

Looking further ahead, Westpac expects additional increases to face stronger opposition. The cumulative impact of past hikes is already easing labor market tightness and cooling housing activity, reducing the urgency for further tightening.

ANZ shares Westpac’s forecast of a November hike, which would push the cash rate to 4.85%. ANZ economists Madeline Dunk and Jack Chambers highlight that trimmed mean inflation reached 1% in the September quarter, far exceeding the RBA’s August expectations. They argue that fears of second-round inflation effects from rising input costs, combined with the central bank’s firm stance, justify consecutive rate increases. ANZ’s August inflation forecast proved correct, with the annual trimmed mean rate holding at 3.6%, though the monthly rise was slightly weaker at 0.2% instead of the anticipated 0.3%. Despite this minor deviation, the bank maintains its call for another move.

NAB takes a more cautious approach, predicting the cash rate has now peaked at 4.6%. While acknowledging Governor Michele Bullock’s hawkish tone, the bank notes her repeated focus on balancing inflation control with labor market stability. NAB argues that the 100 basis points of past increases require time to fully influence the economy, given recent signs of softer household spending, unemployment trends, and weaker purchasing managers’ indexes.

NAB warns that further tightening would become increasingly difficult as financial conditions grow stricter.

Commonwealth Bank agrees with NAB’s assessment, seeing no need for a November hike despite describing the decision as finely balanced. Senior economist Trent Saunders observes that August inflation data showed trimmed mean inflation of about 1% over the September quarter, though monthly inflation slowed from 0.5% in July to 0.2% in August. Annual trimmed mean inflation stayed at 3.6%, while market services inflation remained high at 4.1%.

The bank interprets Bullock’s post-meeting remarks as raising the bar for another increase. CBA suggests the RBA will now assess a broader range of economic indicators, including inflation trends, employment figures, consumer spending, and geopolitical risks, rather than reacting to a single data point.