TDS macro strategists pencil in two 25bp RBA hikes for next year, in May and November, taking the cash rate from 1.50% to 2.00%.
“RBA commentary has been upbeat on the global and domestic economies for some time now and the Governor has indicated that the next move in rates is likely to be higher. So what is the Bank waiting for? For the Bank to hike we suspect they would need to see evidence that wage and inflation pressures are building in the next two sets of WCI and CPI prints before the May meeting. It is possible that the Bank could raise the cash rate even if not all the stars line up as Luci Ellis’ speech implied (i.e., inflation could be picking up but below the mid-point of the RBA’s 2-3% target band and growth can be below the 3% trend).”
“Rate cuts are a low probability outcome given the Bank’s focus on financial stability and the risk that cutting the cash rate would make the adjustment towards higher rates ultimately more difficult.”
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