Reserve Bank of Australia: September hike case and path – TD Securities

TD Securities’ Macro Research team, led by Prashant Newnaha and Howard Du, expects the Reserve Bank of Australia to raise the cash rate by 25bps to 4.60% at the September meeting. They see the case to hike as clear, driven by upside surprises in CPI, firmer GDP, oil prices and AI-related demand, but forecast no further RBA hikes in November or December.

Clear case for September tightening

"TD expects the RBA to hike the target cash rate 25bps to 4.60% at its September Board meeting."

"The upside surprise in the July CPI release on 26 August forced us to seriously consider changing our call for a 25bps September hike, but we formalized the shift a week later following the firmer Q2 GDP release on 2 September."

"Looking beyond the September meeting, the Bank is likely to reinforce the possibility that it may need to tighten policy again."

"However, we do not see a pressing case for the RBA to deliver a follow-up hike either at its November or December meetings to 4.85% for the following reasons:"

"We view pre-emptive tightening as inflation risk management and the impact of the prior 3 hikes are still to flow through."

"The RBA could justify a pre-emptive Sep hike as being a sufficient response to the likely upside Q3'26 CPI outcome."

"The US and Iran have confirmed they are in talks to end their ongoing conflict. Progress should take the pressure off oil prices."

"The RBA Governor detailed the forward-looking employment indicators "...are all looking stable-ish" in her testimony to the House of Representatives Standing Committee on Economics."

"In the instance the Board is not unanimous in its decision to hike, the market will likely view a higher bar for a follow-up hike."

"While we forecast the RBA keeping the cash rate on hold at 4.60% for all of 2027, we acknowledge there is the possibility of the Bank being drawn to the hiking table again at its February 2027 meeting."

"To reiterate, a February 2027 hike is not our central forecast. However, we are flagging these items worth monitoring to justify a possible change of call for 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)