The Reserve Bank of Australia is set to hike its cash rate in November 2022, which is earlier than its current guidance of “2024 at the earliest”, economists at the Commonwealth Bank of Australia said Wednesday.
“We have penciled in an increase of 15 basis points which would take the cash rate to 0.25 percent,” Gareth Aird, head of Australian economics at CBA, said in a research note.
The bank expects that to be followed by an increase of 25 basis points in December 2022.
The CBA economists also expect three further 25-basis point hikes in the first, second and third quarters of 2023. That would take the cash rate to 1.25 percent, the level at which the bank assess the cash rate to be neutral.
The two key assumptions that underpin the bank’s RBA call are the continuation of the expansionary fiscal policy over the next few years and an increase in the net overseas immigration from mid-2022, but at a slower rate than pre-Covid.
“The forward looking indicators of labor demand are very strong yet labor supply is constrained, which means the labor market will continue to tighten very quickly and wages growth will accelerate,” Aird said.
“The Commonwealth fiscal stance as well as the targeted level of net overseas immigration in 2022/23 will have a large bearing on nominal wage outcomes and therefore the path of interest rates.”
The material has been provided by InstaForex Company – www.instaforex.com
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