VIEW: CBA: RBA To Raise The Cash Rate By 50bp In Both August And September

CBA write “we have revised our central scenario for the RBA based on the latest labour force data, a further modest upward adjustment to our near term inflation forecasts and our expectation that the RBA will follow the path of a number of other global central banks in aggressively hiking the policy rate over coming months. We now expect the RBA to increase the cash rate by 50bp at both the August and September Board meetings which would take the cash rate to 2.35%. We anticipate one further 25bp rate hike in November which would take the cash rate target to 2.60% (our updated terminal rate which is ~100bp above our estimate of the neutral cash rate). Financial conditions will continue to tighten over 2023 with no change in the cash rate given the big fixed rate home loan expiry schedule and the impact of the Term Funding Facility being unwound. We retain our call for the RBA to cut the cash rate by 50bp in the second half of 2023 and have pencilled in August and November for 25bp cuts.”