RBA Preview: Forecasts from nine major banks, going to 50 bps

The Reserve Bank of Australia (RBA) will announce its next policy decision on Tuesday, July 5 and as we get closer to the release time, here are the forecasts by the economists and researchers of nine major banks regarding the upcoming central bank's decision.

The RBA is set to hike the Official Cash Rate (OCR) by another 50 basis points (bps) to 1.35% in July vs. June’s 0.85%.

ANZ

“We see the RBA tightening by 50 bps taking the cash rate target to 1.35%. The accompanying statement will likely repeat June’s wording that ‘the Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead.’ This is a clear signal of future rate hikes.”

Standard Chartered

“We see the RBA hiking the cash rate target by 50 bps to 1.35%. Inflation expectations have continued to rise, while supply-side pressures, particularly energy prices, remain high. Wage demands are likely to rise meaningfully unless hiring intentions start to fall. Excess household savings, which we estimate at c.11% of GDP, and the tight labour market should sustain spending in the earlier stage of monetary policy normalisation amid higher inflation and mortgage rates.”

Westpac

“We expect the Board will decide to lift the cash rate by 50 bps from 0.85% to 1.35%. We will be particularly interested in any guidance the Governor may provide about the August meeting, where we expect a third consecutive 50 bps move prior to a pause in September. The June quarter inflation data, to be published on Wednesday, July 27, will be a key update a little less than a week prior to the August Board meeting.”

Danske Bank

“We expect the RBA to hike rates by 50 bps on the back of still persistent global inflation pressures.” 

TDS

“Given the strong data prints and upside inflation risks, we expect the RBA to take decisive action and hike by 50 bps. However, we see a low likelihood of the RBA sounding more hawkish in the statement after the Governor's successful attempt in paring back aggressive OIS pricing.”

ING

“The RBA faces a dilemma at its forthcoming meeting. To hike by 25 bps or 50 bps? We feel the odds are stacking up firmly for 50 bps. Even in the event of a hawkish surprise, expect very limited benefits for AUD in the near term.”

SocGen

“We expect the RBA to increase the cash rate target from 0.85% to 1.35%, which would mark two consecutive big-step hikes. The RBA will continue to say that it expects to take further steps in the process of normalising monetary conditions over the months ahead, which we interpret to mean that the policy rate will be raised to a neutral level of 2.5% by the year-end. The RBA will continue to highlight near-term upside potential in inflation from both global and domestic factors. Its upbeat assessment of economic growth and labour market conditions combined with a cautious approach on consumption will also be the same as in June.”

Deutsche Bank

“We expect the central bank to hike by 50 bps.”

Wells Fargo

“We believe RBA policymakers will raise the OCR 50 bps to 1.35% and maintain a hawkish stance on monetary policy. With inflation trending above 5% year-over-year in Q1, and likely to push higher in Q2, we believe the RBA will keep its foot on the brake of the economy in an effort to contain inflation. Over the course of Q3, we believe the RBA will eventually raise the OCR to 1.85%. Over the longer term, we believe the RBA will raise policy rates to 2.60%, purely in an effort to bring price growth back to target ranges.”