RBA Preview: Forecasts from seven major banks, 50 bps rate hike for four months in a row

The Reserve Bank of Australia (RBA) will announce its next policy decision on Tuesday, September 6 at 04:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of seven 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 2.25% in September vs. August’s 1.85%. Furthermore, Governor Lowe is giving his annual Anika Foundation speech on Thursday, titled “Inflation and the Monetary Policy Framework”.

ANZ

“The RBA will hike by 50 bps and likely keep the final paragraph of the post-meeting statement very similar to that in August. A focus on recent elevated inflation pressures or a dropping of the reference to keeping the economy on an ‘even keel’ would be a hawkish development. But we are also alert to the possibility of a dovish shift via the reference to the normalisation of monetary policy being changed or dropped. Given that the market is already pricing a cash rate of close to 4%, we think the hurdle for a hawkish shift is higher than for a dovish shift.”

Westpac

“We anticipate that the RBA will lift the cash rate by 50 bps. That will take the cash rate to 2.35%, to be in the ‘neutral zone’. 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 rise to 3.10% by year-end and then peak at 3.35% in February 2023 – with moves of 25 bps each meeting from October to February.”

Standard Chartered

“We expect the RBA to continue to hike in September, but at a smaller magnitude of 40 bps (versus 50 bps in August), taking the policy rate to 2.25%. Thereafter, we expect the RBA to continue hiking policy rates by 25 bps in each of the months in Q4. The risk is for the RBA to hike again by 50 bps at the upcoming meeting given elevated inflation and inflation expectations.”

TDS

“We expect the RBA to hike the cash rate 50 bps at its Sep Board Meeting – the cash rate remains below neutral and data has generally been firm. Of more interest is whether Governor Lowe mirrors an urgency to get on top of inflation like the Fed/BoC/RBNZ.”

Danske Bank

“We expect the RBA to hike by another 50bps. RBA has signalled a data-dependent meeting-by-meeting approach and elevated inflation expectations and tighter labour markets point to further policy tightening.”

SocGen

“We expect the RBA to increase the cash rate target from 1.85% to 2.35%, which would mark four consecutive 50 bps rate hikes since the initial one in June. The key question now is both when and at what level the policy rate hike will terminate. We continue to think that the rate-hike cycle will terminate near the end of this year (i.e., December), while we have raised the level of the terminal policy rate from c.2.5% to c.3.0%.”

 Citibank

“RBA is expected to persist with its hawkish rhetoric and raise the cash rate by 50 bps to 2.35%. From here on, we expect 25 bps hikes across October, November and December, for a year-end cash rate of 3.1% to approach the so-called “neutral” rate. RBA Governor Lowe will also deliver a speech on Thursday, titled ‘Inflation and the Monetary Policy Framework’. A more hawkish speech would make a stronger case for more 50 bps rises beyond this week.”