Macro

A Finder survey shows 90% of polled economists and finance experts expect the Reserve Bank of Australia to lift the cash rate by 25 basis points to 4.6% at its upcoming meeting. Nearly half also forecast a second hike before year-end, which would take the cash rate to 4.85%, the highest level since the peak of the 2008 global financial crisis. Markets are also pricing in two increases by early next year, with a 90% probability of a move to 4.6% on Tuesday.

The South African Reserve Bank raised its key interest rate by 25 basis points to 7.25%, citing “large and sustained” price shocks triggered by the Iran war and the need to stop higher inflation from becoming entrenched. Markets absorbed the decision as expectations grew that the Federal Reserve will keep rates elevated. The rand, a risk-sensitive currency, weakened 0.3% against the dollar to 16.40.

Escalating tensions in the Middle East, including Yemen’s Houthis claiming an attack on Saudi military facilities, sent Brent crude surging to $107. Rising energy costs and strong economic data led investors to bet the Federal Reserve will raise interest rates again, pushing the 30-year U.S. Treasury yield to its highest level since 2004. Wall Street’s main indexes fell on Thursday as a result, with the Dow hitting a more than three-month low and technology stocks leading declines in the S&P 500.

Two Bank of England deputy governors suggested they are moving closer to voting for an interest-rate increase as persistently high energy costs risk keeping inflation above target. The BoE kept its benchmark rate at 3.75% last week, but warned inflation could top 4% early next year if the Iran conflict drags on, well above its 2% goal. Markets are pricing a 75% chance of a 25-basis-point hike at the November meeting, according to Reuters.

The Reserve Bank of Australia is expected to raise rates next Tuesday to 4.6%, a 15-year high, after three increases this year took the cash rate to 4.35%. National home prices are down nearly 4% from their peaks, and a government tax change on investment properties has weakened investor lending. With inflation expected to stay higher for longer, falling house prices alone may not be enough to prompt the RBA to cut rates.

Market pricing for a Reserve Bank of Australia rate hike next Tuesday has risen from 72% at the start of the month to 88% as inflation stays high and the Middle East conflict keeps oil and fuel prices elevated. Some economists say the RBA could raise rates again in September and November, potentially delivering back-to-back moves to curb persistent inflation. They also say the central bank could even consider a larger one-off increase of 40 or 50 basis points.

Australia’s unemployment rate rose to 4.6% in August from 4.5% in July, marking its highest level in the post-COVID period. The participation rate climbed to 67.1%, near the record high. RBA governor Michele Bullock has said an unemployment rate between 4.5% and 5% would help cool the labour market and ease inflation pressures. Some economists say the increase in unemployment is not enough to stop the central bank raising rates next week.

President Donald Trump is reportedly preparing a 90-day ban on diesel exports to ease rising diesel prices in the U.S. The national average price of diesel has climbed to $6.52 per gallon from $3.69 a year earlier, according to AAA. Energy Secretary Chris Wright, Treasury Secretary Scott Bessent and oil industry executives have opposed the idea, warning it could be extended and create unintended fallout.

Reserve Bank of Australia Governor Michele Bullock said in a Sydney speech that the labour market remains “a bit too tight”, adding to upward pressure on wages, business costs and inflation. She said unemployment would likely need to rise to between 4.5 and 5 per cent to take enough heat out of the labour market to ease inflation pressures. Most of the big four banks expect the RBA to lift rates next week, with ANZ also factoring in a September increase. Commonwealth Bank has also raised fixed-rate mortgage pricing, including its two-year fixed home loan rate.

The Bank of Japan has raised its policy interest rate to 1.25%, the highest level in 31 years, as it seeks to counter inflation pressures driven by energy costs. The move follows a June increase to 1%, with inflation now running close to 2%. The central bank said it is concerned prices could rise further.