RBA Preview: Forecasts from eight major banks, another 50 bps hike

The Reserve Bank of Australia (RBA) will announce its monetary policy decision on Tuesday, October 4 at GMT 04:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of eight major banks regarding the upcoming central bank's decision.

The RBA is expected to hike rates by 50 basis points to 2.85%, making it the fourth consecutive rate hike of such a degree. Since updated macro forecasts were released at the August 2 meeting, we will not see the next update until the November 1 meeting.

ANZ

“We expect a 50 bps rate hike from the RBA, reflecting strength in recent domestic data, including solid household spending, ongoing inflation momentum and near-record job vacancies. We also expect the RBA to ‘soften’ its message by removing the reference to ‘over the months ahead’ in the context of further rate increases.”

Westpac

“We anticipate that the RBA will lift the cash rate by 50 bps – the fifth consecutive move of 50 bps. That will take the cash rate to 2.85%, a touch on the high side of ‘neutral’. Moves beyond this point are likely to be more measured. Globally and domestically, the inflation outlook is challenging, with risks that inflation expectations ratchet higher. In Australia, headline inflation is expected to climb to over 7% by year-end, the labour market is the tightest in 50 years, and wages growth is accelerating, albeit from modest levels. It is in this environment that the RBA is removing ultra-easy monetary conditions and will shift to a contractionary stance. We anticipate that the cash rate will peak at 3.60% in February 2023 – with further moves of 25 bps at each of the three meetings from November to February.”

Standard Chartered

“We expect the RBA to hike the cash rate by 50 bps to 2.85% from 2.35% previously. We expect the RBA to continue to front-load rate hikes and raise rates into restrictive territory above 3%; we expect the pace of hikes to ease, however, once the policy rate crosses the 3% level.”

ING

“Following some reasonable August labour market data, and stronger-than-expected retail sales figures, recent hints from the RBA that it may soon start to tighten rates at a slower pace are looking a bit less credible right now. With a strong and unified hawkish chorus from US Fed officials, the apparent ruling out by the US White House of a plaza-style currency agreement, and a further sliding of the Australian dollar, the odds are swinging back towards another 50 bps RBA move at the coming meeting.”

TDS

“In the RBA Sep minutes, the Board judged that it may be appropriate 'at some point' to scale back to 25 bps hikes, but we think it is too soon for that. Data on balance is still strong, which suggests the economy is holding up well. Thus, this affords room for the RBA to front-load hikes further as the Governor notes the current cash rate is ‘still probably on the low side’.”

SocGen

“We expect the RBA to increase the cash rate target from 2.35% to 2.85%, which would mark five consecutive 50 bps rate hikes since the initial one back in June. The policy statement will continue to say that the RBA is committed to returning inflation to the 2-3% target range over time while keeping the economy on an even keel and that the size and timing of future interest rate increases will be guided by the data and the outlook by policymakers on inflation and the labour market. The statement will also continue to skip the words ‘normalising monetary conditions’, which we think implies the intention of policymakers to adjust its policy stance to one of outright tightening.” 

Citibank

“We do not expect any moderation in the pace of tightening from the RBA in October given the threat of wider rate differentials caused by expectations of a higher peak in global policy rates. Instead, we now expect 50 bps from the RBA this week to take the cash rate to 2.85%. Smaller rate hikes are likely to follow in November and December, when the RBA Board shifts to 25 bps rate hikes, leaving the cash rate target at 3.35% by year-end with a further 25 bps increase in Q1 2023, leaving the terminal rate next year at 3.6% where RBA policy will be firmly restrictive territory.”

Wells Fargo

“We expect the RBA to deliver a 25 bps hike, bringing the Cash Rate to 2.60%. More specifically, after a 25 bps hike at its October meeting, we expect two more 25 bps hikes in November and December, bringing the Cash Rate to 3.10%.”