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VIEW: Westpac’s Evans Now Looks For 50bp Hike In Oct

RBA

Monday afternoon (Sydney time) saw Westpac’s Bill Evans change his RBA call, noting that “we now expect the Reserve Bank Board to raise the cash rate by 50 basis points in October for a terminal rate of 3.60% by February (revised up from 3.35%).”

  • “We have long argued that the Reserve Bank Board should slow the pace of rate increases once it reaches its assessment of neutral. That is particularly because of the ‘treacherous lags’ that will have built up as the inevitable result of such a sharp rate increase in rates, from 0.10% back in May.”
  • “Whether he wants to start the scale-back at a rate below his assessment of neutral or begin when rates are much nearer his estimate of neutral will be influenced by his assessment of the risks on inflation, the labour market and the economy in general.”
  • “There were significant remarks in the Parliamentary hearing on Friday that suggest he will err on the side of a higher rate before deciding to scale back the pace of tightening.”
  • “We now expect the Governor to decide to push the rate more clearly into his best estimate of the contractionary zone before scaling back the pace of increases.”
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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