VIEW: ANZ Turn More Hawkish On RBA

ANZ “think the RBA will take the cash rate target to a restrictive setting of above 3% by late 2022, more than 12 months earlier than our previous forecast. This reflects the strong momentum in the labour market and the clear upside risks to inflation. We don’t think the RBA will be comfortable with policy merely getting to neutral by year-end given this backdrop.”

• “Our expectation is that the RBA will deliver this via four more successive 50bp rate hikes in August, September, October and November. This 200bp of additional tightening sees the cash rate target at 3.35% by November.”
• “There is a significant chance the RBA could opt to move by more than 50bp at one or more of its upcoming meetings (75bp, say, or even 65bp to “round” the cash rate target to the nearest 0.25%). We would view this as a bring forward rather than implying a higher terminal rate.”
• “At this stage our thinking is that the cash rate will need to remain at this restrictive setting for an extended period, given persistence in core inflationary pressures. But we are conscious the downside risks to the economic outlook will increase with such a rapid move to a restrictive setting”