All four of Australia’s biggest banks now tipping RBA to increase interest rates next week

All four of the nation’s biggest banks are now tipping the Reserve Bank to hike interest rates next week.

Commonwealth Bank and ANZ updated its interest rate outlook within an hour of each other on Monday morning — with both banks now tipping the central bank to hike rates to a 15-year of 4.6 per cent at its meeting next week.

NAB has predicted a September hike since late August, while Westpac updated its outlook late Friday afternoon. ANZ also expects another hike in November.

“The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflationary shock than a growth shock suggests that a single 25 basis point rate hike in November, after the quarterly consumer price index data are released, is no longer the most likely outcome,” ANZ head of Australian economics Adam Boyton said on Monday.

“The RBA has also had a range of opportunities over the past week, through its public communications, to pull back expectations of a near-term rate hike.

“To date, it has chosen not to. At this point it seems unlikely that the RBA communication slated for tomorrow will evolve sufficiently in such a direction to make a September rate hike sufficiently less likely.”

CBA, the nation’s biggest mortgage lender, most recently thought the RBA would hold fire at its September 29 meeting before raising rates in November.

But the bank’s head of Australian economics Belinda Allen on Monday said there had been a build up of factors over recent weeks to see it bring forward its previous call from November to September.

While some economists are predicting as many as three rate hikes will be needed to finally stamp out persistent inflation, Ms Allen remains somewhat less hawkish.

“The risks sit with the need for another rate hike given the persistence in domestic sources of inflation, but this is not yet our base case,” she said on Monday.

“The economy is slowing, rates are restrictive and by the November meeting we think there is a strong chance (85 per cent) that the US will seek a deal with Iran given we see oil inventory depletion in the next five to 10 weeks and a deal will be needed to prevent a sharp spike higher in oil prices.

“As a result, by November oil prices could be lower and as we highlight above, the context of each meeting is important.”

Another widely-expected hike later this month would add $114 to monthly repayments on a mortgage of $750,000.

Combine that with the RBA’s three rate rises so far this year, that borrower is looking at a staggering $454 monthly jump to their repayments by year’s end.

Should it materialise, a fifth interest rate rise on November 3 — the highest level since the onset of the global financial crisis in 2008 — would add another $115 a month on the same mortgage. This would take a borrower’s monthly repayment to $570 across five hikes.