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

TD Securities' Macro Research team anticipates the Reserve Bank of Australia will increase the cash rate by 25 basis points to 4.60% during the September meeting. They identify a compelling case for the hike, citing robust CPI data, stronger GDP growth, rising oil prices, and increased demand driven by AI-related activities. However, TD Securities projects no further RBA rate hikes in November or December.

The team confirms the RBA will likely raise the cash rate by 25 basis points to 4.60% at the September Board meeting, as the July CPI release on August 26th prompted them to reconsider their previous call for a 25 basis point September increase, which was solidified a week later after the Q2 GDP release on September 2nd. While the Bank may reaffirm its intent to tighten policy again, TD Securities does not consider a follow-up hike at the November or December meetings to 4.85% necessary.

They argue that preemptive tightening is a form of inflation risk management, and the effects of the prior three rate hikes have yet to manifest. The RBA Governor's testimony to the House of Representatives Standing Committee on Economics indicates stable employment indicators. If the Board cannot reach a unanimous decision to hike, the market will likely view a higher bar for a subsequent hike.

TD Securities projects the RBA will maintain the cash rate at 4.60% for all of 2027, although a potential hike at the February 2027 meeting remains a possibility.