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16:15:14 05-12-2022

RBA Preview: Forecasts from 10 major banks, broad consensus on a 25 bps hike

The Reserve Bank of Australia (RBA) will announce its next monetary policy decision on Tuesday, December 6 at 03:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of ten major banks regarding the upcoming central bank's decision.

The RBA is set to hike the Official Cash Rate (OCR) by 25 bps from 2.85% to 3.10%, summing up to a total of 300 bps in rate increases in eight months.

ANZ

We do think a December pause will be considered, but with the RBA not meeting again until February and the recent wages and employment data being robust we expect the cash rate target to be lifted 25 bps to 3.10%.

Westpac

We anticipate that the RBA will lift the cash rate by 25 bps, to 3.10%. Inflation is still too high and more work needs to be done in our view. Annual headline inflation is expected to hit the 8% mark in the December quarter and to still be above the 2-3 target band at the end of 2023 (at about 4%, we expect).

Standard Chartered

We expect the RBA to hike the cash rate by 25 bps to 3.10% from 2.85% previously. At the November meeting, the central bank reiterated its view that monetary policy operates with a lag and recent rate hikes are yet to be reflected in mortgage payments. In addition, latest data shows that housing prices are already falling on a YoY basis. However, inflation levels remain elevated. The labour market remains very tight and wage pressures remain. As such, we think the RBA may have to continue hiking, but at 25 bps increments instead of 50 bps. 

UOB

We are penciling in another 25 bps hike, which will take the OCR to 3.10%. Thereafter, we look for a hold.

ING

We have decided that the central bank is no longer particularly concerned with the flow of data, and will hike rates another 25 bps despite recent softer-than-expected inflation. 

Danske Bank

We expect a 25 bps hike.

TDS

We expect a 25 bps increase in the target rate to 3.10%, but all eyes will be on any shift in the language suggesting the RBA will pause in early 2023. We don't expect the RBA to shut the door to further rate hikes in 2023 but given the Bank has raised the cash rate 300 bps, 7 months ahead of assumptions, a dovish tweak cannot be ruled out.

SocGen

We expect the RBA to increase its cash rate target from 2.85% to 3.10%.  While policymakers continue to say that they have not ruled out returning to 50 bps hike if necessary, we dont think that the current environment justifies returning to a 50 bps hike. We reiterate our recently revised terminal policy rate forecast of 3.85%, which matches our forecast of the terminal Fed Funds rate at 5.25% (upper bound). 

Citibank

The final meeting of the year will likely see the RBA hike for the eighth consecutive month. Citi analysts keep their quarterly inflation forecast unchanged at 1.7% and still expect a terminal rate next year unchanged at 3.35% with another 25 bps hike in February to be the last in the cycle, though risks are still tilted to the upside.

NAB

We expect a 25 bps increase. High inflation, a tight labour market and accelerating inflation mean it is too early for the RBA to pause, even as they prioritise keeping the economy on an even keel. As for the post-Meeting Statement, this could equivocate a little further on the guidance that the Board expects further interest rate hikes in the period ahead.

 

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