NAB Calls June RBA Hike to 4.60% as Middle East Inflation Compounds Domestic Pressures

Why It Matters

The revised forecast reshapes market expectations for Australian monetary policy, putting pressure on the AUD and rate‑sensitive assets while highlighting inflationary risk from geopolitical tensions.

Key Takeaways

• NAB projects June RBA rate hike to 4.60%.
• Forecast diverges from ING and CBA, which see a policy pause.
• Survey shows record‑high March purchase‑cost increase in 30 years.
• Middle‑East oil shock adds second‑round inflation pressure.
• Two rate cuts anticipated in late 2027 as growth slows.

Pulse Analysis

The Reserve Bank of Australia has been on a tightening trajectory, lifting the cash rate to 4.35% in May after an 8‑1 vote. Inflation remains above target, driven not only by domestic capacity bottlenecks but also by external shocks. Higher oil and commodity prices linked to the Strait of Hormuz closure have injected a second‑round price effect, prompting the RBA to consider a more aggressive stance than many peers anticipate.

National Australia Bank’s June forecast to 4.60% marks a clear departure from ING and Commonwealth Bank, which argue the May hike signals a pause. NAB’s Business Survey recorded the steepest month‑on‑month rise in purchase costs in its 30‑year history, providing hard evidence that firms are forced to pass higher inputs onto consumers. This data, combined with Governor Bullock’s dismissal of a “wait‑and‑watch” narrative, has shifted market pricing, strengthening the Australian dollar and pressuring rate‑sensitive equities as investors price in a higher probability of consecutive hikes.

Looking ahead, NAB still expects the RBA to ease policy with two cuts in the latter half of 2027 as growth slows and unemployment rises. However, the bank warns that any sustained breach of its $82‑per‑barrel oil price assumption could validate a more hawkish path, extending the restrictive real cash‑rate environment. Investors should monitor commodity price trends, domestic cost‑push pressures, and RBA communications for clues on whether the June hike materialises and how quickly the policy cycle may pivot toward normalization.