Banks split on whether next RBA move is a hike or cut amid energy risks

The Reserve Bank of Australia (RBA) unanimously held rates at 4.35% in August, but major economic forecasters offer varying takes on what comes next:

• MUFG highlights severe external risks. Spiking Brent crude prices, driven by US pressure on Iran and the closure of the Strait of Hormuz, could trigger a global inflation shock. While the RBA has bought time using softer domestic labor and housing data, MUFG warns that persistent energy costs could force a rate hike as soon as September. Markets have already begun pricing in a full hike by next March.
• NAB focuses on the RBA’s subtle tone shift, noting references to a smaller output gap and "somewhat restrictive" financial conditions. NAB interprets this to mean the RBA believes the domestic economy has cooled sufficiently. Consequently, NAB expects steady quarterly GDP growth (0.3%–0.4%) with rates staying on hold through 2026, followed by a first rate cut around mid-2027.
• Westpac characterizes the decision as a "hawkish hold." Softer inflation and labor market data forced the Board to tone down its explicit tightening bias. While Westpac's base case is an extended pause into mid-next year, it cautions that potential energy-driven pass-through leaves the door open for another rate hike later in the year if upside risks materialize.