ANZ expects interest rate hike next week, big four banks in sync
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The news: ANZ has brought forward its rate hike expectations to a 25 basis point increase next Tuesday followed by another in May as higher oil prices from the conflict in the Middle East adds to persistent domestic inflationary pressures.
With the Commonwealth Bank, NAB and Westpac shifting their expectations for monetary policy changes to the same timeline late on Wednesday, economists at Australia’s four biggest banks have reached a consensus.
ANZ, NAB, the Commonwealth Bank and Westpac previously expected a single rate hike in May 2026.
The context: ANZ head of Australian economics Adam Boyton and senior economist Adelaide Timbrell said the “clearest and most immediate impact” of the Middle East conflict is higher inflation. While the higher prices will also lead to “some demand destruction” through the impact on disposable income, this is more uncertain.
They also noted that the RBA’s reaction to the supply shock will be conditioned by the fact that inflation was already above target and the labour market was already considered tight by the central bank.
“The increased inflation risks will exacerbate those inflation concerns, creating more urgency to move quickly to contain inflation expectations. Inflation expectations in the ANZ-Roy Morgan Australian Consumer Confidence data are at their highest level since November 2022,” the ANZ note reads.
In a note published on Wednesday afternoon, NAB group chief economist Sally Auld, head of Australian economics Gareth Spence and senior economist Taylor Nugent similarly noted that before the oil shock “the starting point of robust growth, a too-tight labour market and too-high inflation already supported further tightening”.
They also said hawkish commentary from deputy governor Andrew Hauser in a podcast released on Tuesday “contains more signal than noise”.
Commonwealth Bank head of Australian economics Belinda Allen said that while “the Middle East has set an uncertain backdrop to the meeting”, data releases since the RBA monetary policy board’s last meeting in February by themselves “confirmed that higher interest rates are needed”.
Bank of America and UBS are also expecting the RBA to increase interest rates next week.
The sources: ANZ research, CBA research, NAB research
