Outgoing Governor Philip Lowe will deliver his last RBA decision on Tuesday 5 September before Deputy Governor Michele Bullock (wo)mans the helm.

Will he have one last rate hike up his sleeve? Or, will he want to err on the side of caution and end on a good note with the Australian mortgage holder?

The big-four banks and their economists believe there’s been no evidence in the last month that would suggest a change of direction from the last monetary policy meeting.

The RBA has held off on hiking the cash rate for the last two months, leaving the official rate at 4.10%.

Though the central bank retains a tightening basis - we will hike if we have to - all signs are pointing to a cooling economy.

Monthly inflation posted a softer than expected result, dropping to 4.9% in July.

And while this remains well above the RBA’s ideal target range of 2-3% underlying, it is down significantly from the peak of 8.4% in December 2022.

The RBA would also have been pleased with July’s unemployment data, which rose to 3.7%. It seems macabre but having too many people employed is inflationary.

While that does mean more unemployed Aussies, the RBA believes the jobless rate needs to hit 4.5% in order for inflationary pressures to ease and for it to hit inflation targets in time.

As of 31 August, market pricing as per the ASX rate tracker ascribes an 86% chance of a hold at Tuesday’s Board meeting.

Here’s a breakdown of the big-four banks’ forecasts.

NAB - hold, but don’t count out one more hike

While NAB Market Economist Taylor Nugent believes there is little data to shift the RBA from their wait and see stance this month, he’s not ruling out one last 25 basis point hike.

“The RBA saw a credible path to return inflation to target at the current cash rate in August, and given the recent flow of data, is likely to retain that assessment in September,” Mr Nugent said.

“NAB expects the data flow over the next few months, however, to see the RBA act on their tightening bias, and we pencil in one additional hike in November.”

NAB expects the RBA will keep the cash rate on hold at 4.35% until August 2024, when it will start cutting rates.

CommBank - the tightening cycle is complete

Unlike previous monetary policy predictions, CommBank Senior Economist Belinda Allen does not view the September meeting as a line ball call.

“The data flow over the past month and the large amount of rate hikes delivered to date make it a clearer decision in September,” Ms Allen said.

“However, we expect the RBA will still run through the case to hike and maintain a tightening bias.

“We expect the cash rate to be on hold for the remainder of 2023 as prices, wages, and activity data indicate no further tightening is required.”

The major bank remains optimistic the RBA will cut rates in the first quarter of 2024, specifically at the 18-19 March Board meeting.

However, CommBank argues the risks to a later start date are present should economic data remain resilient.

Westpac - rates have reached their peak

After August’s monetary policy decision, Westpac Chief Economist Bill Evans declared rates have reached their peak and inflation is on its way to reaching the desired target by mid-2025. 

However, Mr Evans remains cautious, signalling the hurdles for more rate hikes looks high, given the economy is starting to operate well below capacity despite a tight labour market.

ANZ - no more gas left in the tank

ANZ Economists Adam Boyton, Adelaide Timbrell, and Madeline Dunk are also expecting no change to the cash rate on Tuesday.

"We see the broad balance of the data flow and events being unlikely to shift the Board from its on-hold stance," the economists said.

However, they believe the post-meeting statement will, as per usual, acknowledge the possibility rates may need to rise further in the coming months to ensure inflation returns to target.

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