VIEW: Westpac’s Evans Looks For Hike In July, Possibly Another In August

Westpac’s Bill Evans notes that “our reading of the statement is that the Board believes that further work will need to be done in the near term to allay their concerns around inflationary expectations and wages growth.”

• “Despite having increased the cash rate in both May and June we expect that a further rate hike will be required by the Board in July, to really emphasise their commitment to the inflation objective.”
• “Thereafter the risk is that a further follow-up move may be required at the August meeting when the June quarter inflation report will be available. We expect that underlying inflation will have dropped from 6.6% to 6.1% but labour markets will remain tight and the ongoing concerns around wage pressures will persist.”
• “The additional risk for the August meeting is that, due to these concerns around expectations, the staff may raise their inflation forecasts which would open the door to another rate increase.”