Banks split on next RBA meeting as households ‘rattled’ by hikes

• Both ANZ and Westpac now predict the RBA will increase interest rates to 4.85 per cent at its November meeting.
• NAB believes rates are already high enough and the economy is slowing, while CBA has reserved its forecast, believing that each meeting left in 2026 is now “live.”
• Economists say Aussie consumers have been “rattled” by interest rate rises and that any more hikes will deepen economic pessimism.

Two of Australia’s big four banks believe the RBA will hike interest rates again when it meets in November, despite Aussie consumers feeling “rattled” by a multitude of cost-of-living pressures.

In a research bulletin published yesterday, Westpac’s Head of Australian Macro-Forecasting, Matthew Hassan, said the central bank will be worried that higher fuel prices are driving inflation and will be forced to intervene.

“The higher fuel prices that are contributing to this are also starting to flow through into higher prices across a broader range of goods and services – a sign that the upside risks to inflation the RBA has previously warned about are materialising,” Hassan said.

“The Board is also wary of demand pressures starting to emanate from the AI/data centre boom,” he added. “On balance, we think that a follow-up rate hike is likely at the RBA’s November meeting.”

Hassan said the most recent hike in September “rattled” consumers, who recorded one of the lowest sentiment reads since the recession of the early 1990s.

“Consumers are on high alert for more interest rate increases,” he said.

“Amongst those surveyed after the RBA decision, just over 80 per cent, an overwhelming majority, expect mortgage rates to increase further over the next 12 months.”

Westpac is not alone in its forecast. ANZ also believes that interest rates will be hiked in November, forecasting that inflation will not have returned to the bank’s ideal “2 to 3 per cent” range in time for Christmas.

“We still think another rate hike in November is more likely than not, as we expect Q3 trimmed mean inflation to exceed the RBA’s forecasts,” ANZ economist Sophia Angala wrote in a research note yesterday. 

“This would take the cash rate to 4.85 per cent, its highest since 2008, which would likely weigh on consumer spending.”

But the consensus among the majors is not universal.

Matt Comyn, CEO of Commonwealth Bank, believes the RBA’s next move will depend heavily on inflation data not due until October 28.

“We believe that’s the last [rate rise], but certainly I think the last meeting of this calendar year is live,” Comyn told the ABC’s Alan Kohler.

“We see and feel … the impact of higher rates. We feel that customers obviously are feeling the increasing burden from higher rates.”

NAB, for now, believes that hiking interest rates at either the November or December meeting this year is now a “tougher call”.

“It is important to note that with policy now considered restrictive (or close to) by the Monetary Policy Board, each decision to hike from here is – by definition – a tougher call,” the bank predicted following last week’s hike.

“Moreover, our forecasts as they stand today – cash rate peaking at 4.6 per cent, core inflation in the target band by end 2027 – will see the real cash rate at around 1 per cent or higher for the next 12-18 months. 

“This is not necessarily high by historical standards, but our judgement today is that it looks high enough for now for an economy that is already slowing.”

What would another interest rate rise cost you?

The RBA has not signalled any direct intention to raise rates again in November, only that it will do “what is necessary” to bring inflation back to target.

But if interest rates were to rise again by 0.25 basis points to 4.85 per cent, some households may need to find an extra $100 a month to meet their repayments.

Canstar analysis of the average owner-occupier paying principal and interest with 25 years remaining shows that on a loan of around $700,000, a rate hike in November could push repayments up by $107 a month.

Over 2026, the cumulative increase from a fifth interest rate hike would mean borrowers with the same $700,000 loan would have to find an extra $532 a month compared to last year.

For borrowers with bigger loans – of around $1 million – a fifth interest rate rise would see their monthly repayment rise by $153 a month, and their cumulative repayment of five interest rate hikes in 2026 up by an eye-watering $759 a month.