Big 4 unite behind twin March, May hikes

In a note released on Thursday (12 March), ANZ’s head of Australian economics, Adam Boyton, said he now expected the Reserve Bank of Australia (RBA) to lift the cash rate by 25 basis points at its 16–17 March meeting and follow up with another quarter‑point move in May.

He described the upcoming decision as more finely balanced than the RBA’s February call, yet said that the combination of a strong domestic starting point and a fresh inflation shock from the Middle East left the board with little room to wait.

“Beyond the March meeting, we still expect an additional 25bp hike in May. We then expect a pause while the RBA assesses whether the increase in the cash rate is sufficient to contain the inflation risks,” he said.

“We expect this pause will also give the RBA time to assess geopolitical developments and the global economic outlook.”

Boyton said the ongoing military conflict in the Middle East was feeding into Australia primarily through prices as opposed to activity.

He stressed that this was of note due to the nation’s high inflation dilemma.

“The clearest and most immediate impact of the Middle East conflict on Australia is higher inflation,” he said.

“The starting point also matters for the RBA’s reaction to a supply shock, with inflation above target and the RBA viewing the labour market as tight, the inflation risks are likely to be more central for the Board than risks around activity.”

In Boyton’s view, the board was already mulling another increase later this year, even before oil prices surged and reiterated that the latest developments had merely brought the timetable forward.

The economist pointed to several data points underpinning the call, with Australian Consumer Confidence readings in the ANZ‑Roy Morgan survey sitting at their strongest levels since late 2022.

He also highlighted that output grew by 2.6 per cent over the year to the December quarter, which the RBA itself has described as above its estimate of potential growth.

Energy markets were another important piece of the puzzle for ANZ, with Boyton underlining that Australia’s status as a net energy exporter changed the way higher global prices would wash through the economy.

While cost-of-living pressures will likely intensify for households via fuel and power bills, ANZ said a sustained lift in export prices would also boost national income.

“A persistent increase in prices (North Asia LNG prices are up 50 per cent since the escalation of the conflict) will be a positive term of trade shock – though this will take time to permeate throughout the economy.”

ANZ’s position aligns the bank with National Australia Bank, Westpac, and Commonwealth Bank, which on Wednesday all shifted their existing predictions of a single May rise to a twin-hike path – as they respond to increasingly hawkish rhetoric from the RBA’s leadership and the latest oil-driven spike in inflation risks.

However, the sequence caps off a rapid escalation in rate expectations, with the Bank of America the first institution to tip dual March and May hikes on Tuesday afternoon.

Markets lean towards a March move

ANZ’s call lands in a market that has already been steadily pricing in a higher chance of action next week.

Short‑dated interest rate futures are now clearly tilted towards a 25-basis point increase, despite a hold remaining a live option.

As of Wednesday (11 March), the ASX 30 Day Interbank Cash Rate Futures March 2026 contract was trading at 96.08.

On standard pricing conventions, this implies that traders see roughly a 62 per cent chance that the RBA Monetary Policy Board will lift the cash rate from 3.85 per cent to 4.10 per cent at Tuesday’s rate announcement.

This article was first published in SPI’s sister publication The Adviser.

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