VIEW: RBC Roll Forward Hike Call

RBC note that they "expect the RBA to become more confident that inflation will be sustainably within target as 2022 unfolds with a global tightening cycle well underway next year. The onus will be on wages growth to move closer to 3% over the next 12 months and above 3% in 2023. Headwinds remain, but we continue to expect wages growth of 2.75% by end 2022. Coupled with a stronger starting point for inflation and more active global central banks, this should be enough for the RBA to begin considering rate hikes. We bring forward our RBA lift-off call to Q123 from Q4 and raise our end-2023 RBA cash rate forecast to 0.75% from 0.50%. We pencil in two further hikes in 2024 but maintain that terminal cash is unlikely to be above 1.5% this cycle. A faster pace of taper (to A$2bn in February) and an earlier end to QE by May 2022 are also likely, in our view."