Sell-side Revise Up Peak RBA Rate Forecasts In Response To Higher Inflation

The Australian is reporting on the changes to RBA forecasts by sell-side analysts. Here is a summary:

• ANZ now expects an additional 25bp hike in December bringing its terminal rate to 3.85% in May 2023. The RBA is expected to tighten more frequently rather than return to 50bp moves. Inflation should also be stronger going into 2023 with upside risks stemming from floods, the weaker AUD and global inflation pressures.
• CBA has revised up its RBA rate forecasts to include 25bp for December as well as November bringing its terminal rate forecast to 3.1%. Head of Australian economics Aird noted that inflation is a “lagging indicator” and that tightening should impact inflation in 2023.
• NAB now expects not only 25bp rate rises in November and December but also February and March 2023 with rates peaking at 3.6%. While 25bp is the most likely scenario in November, they see 50bp as a possibility.
• Goldman Sachs now sees a 30% chance of a 50bp hike in November up from 10%. It expects 25bp hikes at the next four meetings with rates to peak at 3.6% but the risks are “skewed to the upside”. The RBA is also likely to revise trimmed mean inflation for Q4 2022 to 6.5% from 6%.
• AMP also doesn’t expect another 50bp hike but has revised up its terminal rate forecast to 3.1% (+25bp). Senior economist Mousina noted that services inflation was too high and so the risk is for more tightening in 2023.
• Citi sees upside risks to its terminal rate of 3.35% in Q1 2023. Citi economist Williamson noted that “sticky inflation” items remain “too high”. He doesn’t expect the RBA to return to 50bp increases.