All big four banks now tip triple-dip rate hike pain for borrowers

ANZ has followed the other big four banks in predicting triple rate hike pain for Aussie borrowers.

CBA, Westpac and NAB yesterday shifted their cash rate predictions due to inflation running too hot, a stretched labour market, and the war in the Middle East – which is likely to add to inflation.

All four big banks now anticipate the Reserve Bank will increase the cash rate 25 basis points when it meets next Tuesday, and by the same margin at the following meeting in May.

Debit cards from the big four banks - Commonwealth Bank, NAB, Westpac, ANZ

The RBA increased the interest rate by 0.25 per cent at its most recent meeting on February 3, to 3.85 per cent.

A triple hike would bring the cash rate to 4.35 per cent.

Across three prospective hikes in February, March and May, a borrower with a million-dollar mortgage would pay an extra $453 every month.

The major banks cited high inflation and the instability brought on by the conflict in Iran as the reasons why they were now forecasting what would end up being three consecutive rate hikes.

"With inflation above target and the labour market tight, the inflation risks are likely to be more central for the board than risks around activity," ANZ's economic team said.

"The increased inflation risks will exacerbate those concerns, creating more urgency to move quickly to contain inflation expectations."

Impact of a March rate hike on borrowers

NAB and Westpac yesterday said the RBA's decision would rely on developments in the war in the Middle East and its impact on oil prices and the wider market.

"Much will depend on the trajectory of oil prices and the domestic data flow, and we see two-sided risks around our new central case for a 4.35 per cent peak," NAB said in a statement yesterday.

Westpac chief economist Luci Ellis said a swift resolution to the war, and subsequent fall in oil prices "would mean that the expected March hike would not be followed up in May".

"Again, this is not our base case, but we will keep the possibility under review," Ellis said.

Westpac said the effect of higher oil prices on inflation was "large but temporary" but believes the RBA will "nevertheless feel compelled to react".

Canstar Data Insights Director Sally Tindall said war in the Middle East "has cast a huge cloud of uncertainty over the [rates] decision".

"While the short-term impact of the conflict will push up prices, particularly fuel, the longer-term damage to the economy and jobs market is not yet clear," she said.

"If the Westpac and NAB forecasts prove accurate, the RBA would deliver three back-to-back rate hikes across February, March and May – a scenario that would add further pressure to already stretched household budgets."

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