S&P/ASX 200 Index (ASX: XJO) investors will not only have the Melbourne Cup to draw their attention on 7 November, they'll also learn whether the Reserve Bank of Australia (RBA) lifts interest rates or takes another pause.
You'll excuse me for not including the possibility of an interest rate cut in November.
It's hard to believe that it was only back on 3 May 2022 that Australia's official interest rate stood at a rock bottom 0.10%. With rates rising rapidly since then, the ASX 200 has come under pressure, losing around 8% over that time.
The last rate boost came on 7 June this year, bringing the cash rate to the current 4.10%.
And while most ASX 200 investors will have been hoping that was the final boost to interest rates, the latest inflation data released by the ABS yesterday looks to have poured cold water on those hopes.
The ABS reported that the consumer price index (CPI) rose 1.2% in the September 2023 quarter and 5.4% annually. That came in 0.1% higher than consensus economist expectations of a 5.3% annual increase.
With that data in hand, here's what the top economists at the big four ASX 200 banks say we can expect from the RBA in November (courtesy of The Australian).
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What are the ASX 200 banks forecasting on interest rates?
First up, Westpac Banking Corp (ASX: WBC) chief economist Luci Ellis, who also happens to be a former RBA economist.
Addressing the hotter-than-expected inflation report, Ellis said:
We assessed that it would take a significant upside surprise to induce the RBA board to raise rates at the November meeting. A 0.1% difference might not seem like a lot, but the underlying detail was sobering.
With that sobering detail in mind, Ellis is predicting the RBA to hike interest rates on 7 November.
Moving on, National Australia Bank Ltd (ASX: NAB) senior economist Taylor Nugent said the CPI data reinforced the bank's forecast of another RBA interest rate hike next month.
"We had been warning for some time that the RBA was overly optimistic in its near-term forecast for disinflation," Nugent said.
Nugent added:
Progress on disinflation to date has primarily come from goods and homebuilding drivers slowing. NAB's forecasts have a slower moderation in inflation in the near term than the RBA's August forecast, and we expect the RBA to revise higher their near-term forecasts at the November meeting.
As for Australia and New Zealand Banking Group Ltd (ASX: ANZ), the ASX 200 bank's chief economist Adam Boyton also expects the RBA will lift interest rates in November.
According to Boyton (quoted by The Australian):
Given the hawkish rhetoric from the RBA over the past two weeks and an uncomfortably high Q3 CPI outcome, we now expect the RBA to increase the cash rate by 25 basis points in November to 4.35%.
And ANZ said investors should be prepared for yet another potential interest rate hike from there and not hold their breath waiting for the RBA to cut:
Beyond the November meeting, we expect the RBA to return to an extended pause. While 4.35% should mark the peak in the cash rate, there is a risk it could tighten beyond that. Any easing remains a very long way off.
So are any of the ASX 200 banks' top economists forecasting the RBA will hold fire on raising interest rates in November?
Unfortunately, no.
Gareth Aird, head of Australia economics at Commonwealth Bank of Australia (ASX: CBA) is on board with his colleagues in forecasting a 0.25% rate hike next month.
According to Aird:
We consider the lift in underlying inflation over Q3 23 to be sufficiently strong for the RBA to act on their hiking bias at the upcoming board meeting.
We believe that pace is sufficiently firm to cause the board some discomfort given the RBA has recently upped its rhetoric on the importance of keeping inflation expectations anchored.
