As September draws to a close, Australia’s Big Four banks are unveiling their predictions ahead of the Reserve Bank of Australia’s (RBA) next decision. Will the RBA hold rates, or are cuts on the horizon? Let’s dive into what the banks are saying and what might shape the RBA’s next move.
The RBA’s September Stance: No Rate Cut Expected
As things stand, the RBA’s cash rate sits at 3.6%. The Big Four banks—Commonwealth Bank, Westpac, NAB, and ANZ—are all in agreement that the RBA will likely keep the rate unchanged at its September meeting. It’s not necessarily what borrowers want to hear, but after months of rate hikes, this decision could offer a small reprieve. However, this doesn’t rule out future cuts, especially as inflation continues to fluctuate.
Inflation Data Throws a Wrench into Predictions
So, why the hesitation to cut rates in September? Inflation numbers are playing a crucial role. The August inflation data revealed a slight increase, with the annual inflation rate edging up to 3%, up from 2.8% the month prior. This unexpected rise threw off the predictions of a rate cut, as inflationary pressure remains a key concern for the RBA.
Commonwealth Bank’s Belinda Allen noted how significantly market pricing has shifted in recent weeks. What initially had a 20% chance of a rate cut for September has now dropped to effectively zero. Meanwhile, the forecast for a 25 basis point cut in November has also decreased, now hovering under 50%.
When Will Rate Cuts Come? It’s Still Uncertain
Despite the uncertainty around September, Westpac’s chief economist, Luci Ellis, remains hopeful about potential cuts later on. Westpac’s base case expects rate cuts in November, February, and May, but Ellis acknowledged the growing doubt over these predictions, reports Yahoo Finance.
With the Australian economy nearing full employment and inflation nearing its target, the RBA is unlikely to rush into any drastic cuts. The central bank is, as Ellis puts it, walking a tightrope: reluctant to keep tightening policy for too long but cautious about loosening it too quickly.
NAB’s Conservative Outlook: No Cuts Until 2026?
NAB, however, has taken a more conservative stance. Initially predicting rate cuts in November and May, NAB economists have now revised their outlook, pushing back their expectations and forecasting the RBA will hold rates steady until May 2026.
They cite concerns about inflation and the time it will take for the economy to regain confidence in its trajectory. This more cautious view reflects a broader uncertainty in the market, where many are questioning how quickly the RBA can pivot after such a long period of rate hikes.
For homeowners and savers, this uncertain landscape might feel frustrating. After months of rising rates, many are hoping for a break. However, with inflation figures still playing an important role in the RBA’s decision-making, it seems we may not see relief as soon as some would like.
The shift in market expectations for September and November rate cuts highlights how unpredictable things are. While cuts could still come in the future, it’s clear the exact timing and size are anyone’s guess.
The RBA’s Balancing Act
Ultimately, the RBA’s decisions will come down to managing the delicate balance between controlling inflation and supporting economic growth. It’s a challenging position, one that leaves room for uncertainty and debate.
The Big Four banks may not agree on when the next cut will happen, but they all agree on one thing: the future remains highly dependent on inflation and employment data, as well as the broader economic picture.
