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Big banks’ surprise interest rate calls: ‘Last thing the RBA wants’

All eyes are on the Reserve Bank meeting next week after recent ABS data showed inflation was coming down.

Bank collapse fears: A composite image of the RBA, CBA, ANZ, NAB and Westpac logos.
The big four banks are split down the middle on what they're expecting the RBA to do in April. (Source: Getty)

Economists from Australia’s biggest banks are divided on whether the Reserve Bank (RBA) will hike interest rates for the 11th consecutive meeting next week, or hit the pause button.

Two of the big banks have updated their forecasts on the back of inflation data released this week by the Australian Bureau of Statistics (ABS).

CBA now expects the RBA will pause in April but hike in May, while NAB still predicts the RBA will increase official rates on Tuesday but that this will be the last hike in the cycle.

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As it stands, CBA and Westpac predict the RBA will pause on Tuesday. NAB and ANZ expect it will hike by 0.25 per cent.

ANZ is forecasting a cash rate peak of 4.1 per cent, with the other three expecting a peak of 3.85 per cent.

Big Four cash rate forecasts:

  • CBA: Pause in April, 0.25 per cent hike in May to cash rate peak of 3.85 per cent, four cuts from November 2023 to May 2024 back down to 2.85 per cent.

  • Westpac: Pause in April, 0.25 per cent hike in May to cash rate peak of 3.85 per cent, six cuts from February 2024 to May 2025 back down to 2.35 per cent.

  • NAB: 0.25 per cent hike in April to cash rate peak of 3.85 per cent. Three cuts in 2024 across February to April back down to 3.10 per cent.

  • ANZ: 0.25 per cent hike in April, 0.25 per cent hike in May to cash rate peak of 4.1 per cent. One cut in November 2024 to 3.85 per cent.

RateCity.com.au research director Sally Tindall said the fact economists were divided on the outcome of Tuesday’s meeting illustrated just how close the call for the RBA would be.

“The RBA is looking for an opportunity to pause and will therefore be looking for one in the data,” Tindall said.

“One reservation the RBA might have is what message a pause will send to Australian households. The last thing the board wants is for people to think that’s the end of the hikes. Inflation is still at 6.8 per cent – there is no way the RBA will rule out any more increases.

“If the board does decide to pause, it’s likely to come with a caveat that there could still be more hikes ahead.”

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