RBA Poised to Hike Next Week as Pump Prices Surge

Markets and forecasters line up for a move

Bloomberg Economics says the RBA is likely to tighten next week, and cautions a second increase could follow in November. Traders are largely on the same page, pricing about a nine-in-ten probability that the cash rate goes up by a quarter point to 4.6%. ANZ now factors in an extra increase in September on top of its November call, while UBS has pivoted to a back-to-back September and November path.

Both banks peg the peak at 4.85%, a level last seen in 2008. Commonwealth Bank of Australia has pulled its expected timing forward to next week from November, pointing to Brent crude holding above $100 a barrel.

Signals from the RBA and the calendar

The nine-member board convenes Sept. 28-29. On Friday, Governor Michele Bullock noted that several of the upside risks the bank had identified "appear to be materializing." At 1 p.m. in Sydney, she will take part in a fireside chat, and independent director Iain Ross will deliver remarks in Melbourne at 5:30 p.m. today. Assistant Governor Sarah Hunter, in a podcast released early Tuesday, said, "There's the conflict in the Middle East and what it's done to oil prices, if you filled your car up recently, you're probably noticing that." Referring to the prior decision to hold at 4.35%, she added, "The board were pretty clear that even though they didn't hike the cash rate, they are still very concerned about inflation," and "We think that the risk to inflation is skewed to the upside."

Energy squeeze is the pivot point

Sticker shock at the pump is back. Australian fuel prices jumped 16 cents in the past week, the sharpest weekly rise since mid-June, Australian Institute of Petroleum data show.

Big picture and what to watch

The RBA kicked off the year with three straight increases to counter a renewed surge in inflation. Over the past several weeks, the Federal Reserve, Bank of Japan, and European Central Bank have also lifted rates amid rising energy costs, while the conflict in the Middle East shows little sign of a quick resolution. McIntyre, who had previously expected the RBA to stay on hold for the rest of 2026, has now changed tack.

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If ANZ and UBS are right and the policy rate reaches 4.85%, households and businesses would be dealing with the highest interest costs since 2008. For your own budget, that combination of pricier fuel and potentially higher mortgage or loan payments is the real-life backdrop as the RBA heads into next week's decision.

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