Australian Banks Forecast RBA Rate Hikes in March, May

Major Australian banks have forecasted that the Reserve Bank of Australia will raise interest rates at its upcoming meetings in March and May, potentially reversing last year's cuts amid surging oil prices from the Middle East conflict.

The predictions from the Commonwealth Bank, National Australia Bank, Westpac and ANZ come as the central bank prepares for its policy board meeting on March 16 and 17. All four institutions now anticipate a 25 basis point increase in the cash rate at each of those sessions, lifting it from its current level of 3.85 percent to 4.35 percent. This would undo three rate reductions implemented in 2024, which had eased borrowing costs following earlier inflation pressures.

The shift in forecasts stems from a spike in global oil prices triggered by escalating tensions between the United States and Iran. Brent crude oil surged from US$56 per barrel at the end of February to a peak of US$119 in early March before retreating to US$94 as of recent trading. Analysts estimate that every US$10 rise in oil prices adds about 10 cents per liter to Australian fuel costs, contributing to broader inflationary risks. Headline inflation stood at 3.8 percent in...