Experts split on whether next RBA move is a hike or cut amid energy risks

The Reserve Bank of Australia (RBA) unanimously held rates at 4.35% in August, but major economic forecasters offer varying takes on what comes next:

• MUFG highlights severe external risks. Spiking Brent crude prices, driven by US pressure on Iran and the closure of the Strait of Hormuz, could trigger a global inflation shock. While the RBA has bought time using softer domestic labor and housing data, MUFG warns that persistent energy costs could force a rate hike as soon as September. Markets have already begun pricing in a full hike by next March.
• National Australia Bank (NAB) focuses on the RBA’s subtle tone shift, noting references to a smaller output gap and "somewhat restrictive" financial conditions. NAB interprets this to mean the RBA believes the domestic economy has cooled sufficiently. Consequently, NAB expects steady quarterly GDP growth (0.3%–0.4%) with rates staying on hold through 2026, followed by a first rate cut around mid-2027.
• Westpac characterizes the decision as a "hawkish hold." Softer inflation and labor market data forced the Board to tone down its explicit tightening bias. While Westpac's base case is an extended pause into mid-next year, it cautions that potential energy-driven pass-through leaves the door open for another rate hike later in the year if upside risks materialize.
• Commonwealth Bank (CBA) expects the RBA to hold rates at 4.35% through 2026, targeting 2027 for two cautious cuts. While disinflation continues, the Board’s warning of potential hikes aims to suppress premature market easing. Upcoming July CPI data will be the immediate test, with a November hike remaining a key upside risk.