VIEW: Goldman Stick With 75bp Aug Hike Call

Goldman Sachs note that “Governor Phil Lowe flagged the RBA was not on a "pre-set path" for the cash rate but reiterated the neutral short-term rate was likely to be "at least" 2.5%, with upside risks from an upward shift in inflation expectations. Governor Lowe repeatedly highlighted that the RBA was committed to keeping medium-term inflation expectations anchored around 2-3%, with "further" rate hikes needed "over the months ahead" to cool aggregate demand. While a close call, we continue to expect the RBA to increase the cash rate +75bp in August and +50bp in September - reaching a level of 2.6% broadly consistent with 'neutral' - before slowing the pace of hikes to +25bp in Oct/Nov/Dec to achieve a modestly contractionary rate of 3.35% by year end. This path reflects our above-consensus inflation forecasts for 2022.”