MNI: Economists, Money Market in Sync on RBA Rate Hike Bets

--Out of 21, 7 forecast RBA Hike in November

--Macquarie Pushes Back RBA Hike Forecast to Q1 2019, HSBC Lone Voice for Aug

By Sophia Rodrigues

     SYDNEY (MNI) - Economists are in sync with the money market in pricing the

possibility of a first hike in the Reserve Bank of Australia's cash rate in this

cycle in November, although the latter might be slightly more hawkish.

     A MNI poll of 21 economists show seven of them, or 33%, expect a 25bps hike

in November. This compares with the money market which is pricing 11bps of

tightening, equivalent to a 44% chance of a 25bps hike in that month.

     Earlier Wednesday, Macquarie economist Justin Fabo revised his view, now

expecting the first rate hike in Q1 of 2019, compared with a previous view for a

hike in August this year.

     With this change, HSBC is now the lone forecast a rate hike in August this

year, though their economists think the risk is for a later move. No one expects

a hike prior to August.

     Alongside the seven who have a November hike as their base case, Nomura

economist Andrew Ticehurst thinks there's a risk the RBA might go sooner that

his forecast for Q1 of 2019. 

     Macquarie's Fabo also admits "it was a toss-up whether we pushed the

expected first rate hike back to 2019 or just slipped it three months to

November this year." He thinks an argument could be made to hike in November and

a genuine case could also be made to hold rates for longer than his new

forecast.

     Economists at Goldman Sachs recently pushed back their hike forecast to

November from May but think there's still a 35% chance the RBA could hike

earlier -- in August.

     Among the ones forecasting a hike in November are two of the four big

banks. National Australia Bank expects a hike in November, followed by two hikes

in 2019. Commonwealth Bank's forecast is also for a November increase but with

risks skewed for a later move.

     Below is a table of forecasts for the next RBA cash rate decision on April

3 and the outlook for the cash rate, and where the risk is skewed towards (where

available). The cash rate is currently at 1.5%.

                    April 3                                  Outlook

--------------------------------------------------------------------

NAB                    Hold       25bps hike in Nov; 2 hikes in 2019

ANZ                    Hold           Hold in 2018; Hike in mid-2019

Westpac                Hold                          Hold 2018, 2019

CBA                    Hold         25bps hike in Nov; Risk of later

Goldman Sachs          Hold       25bps hike in Nov, risk of earlier

Citigroup              Hold         Hike in Nov, risk for later hike

JP Morgan              Hold              Hold for foreseeable future

HSBC                   Hold  25bps hike in Aug, risk skewed to later

TD Securities          Hold                        25bps hike in Nov

UBS                    Hold                    25bps hike in H1 2019

Deutsche Bank          Hold                        Hold through 2018

AMP Capital            Hold         Hike in Nov, risk for later hike

Moody's                Hold                        Hold through 2018

St. George             Hold                    25bps hike in Q1 2019

Macquarie              Hold    25bps hike Q1 2019, 2.25% by end-2019

Nomura                 Hold   25bps hike in Q1 2019; risk of earlier

RBC Capital            Hold                        Hold through 2018

BankAm-ML              Hold                         25bp hike in Nov

Morgan Stanley         Hold                       Hold until Q3 2019

Standard Chartered     Hold                             Hold in 2018

Wells Fargo            Hold                      Hold well into 2018

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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