Reserve Bank of Australia: September hike expectations strengthen – TD Securities

TD Securities’ Prashant Newnaha now expects the Reserve Bank of Australia (RBA) to raise the cash rate by 25bps to 4.60% at the late-September meeting. The change follows stronger-than-expected Q2 Gross Domestic Product (GDP) and firm discretionary consumption. Newnaha notes growth is running slightly above trend and sees a further hike this year as possible but not its base case.

TD shifts to September rate hike call

"TD now expects the RBA to deliver a 25bps hike at its meeting at the end of the month, taking the target cash rate to 4.60%. The details of today's Q2 GDP print add to the case for the Bank to hike. A follow-up hike this year is a possibility but is not our central view."

"Annual growth is running a touch above trend, but the Bank has clearly stated growth needs to slow to get on top of inflation. Following today's Q2 GDP release, implied q/q GDP growth to meet the Bank's Aug '26 MPS forecasts is 0.3% q/q in Q3 and Q4."

"S&P's Australia Composite PMI survey covering July and August so far points to growth improving in Q3 and likely exceeding the RBA's implied Q3 q/q GDP forecast."

"Household consumption was roughly in line with the Bank's 0.4% q/q projection, but growth in discretionary spending has accelerated over recent quarters. The monthly household spending data does not exactly track the measure of spending in the national accounts but the monthly household spending data for July revealed discretionary spending remains firm."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)