Westpac Shifts View To 50bps Hike Next Week

Westpac Chief Economist Bill Evans: "We now expect the Reserve Bank Board to raise the cash rate by 50 basis points in November for a terminal rate of 3.85% by March, revised up from 3.6%. The September quarter inflation report has come as such a major surprise that we think the Reserve Bank Board will decide to raise the cash rate by 50bps at the next Board meeting on November 1."

"The Budget papers have raised the prospect of a 50%+ increase in electricity prices in 2023. This means inflation overall will remain more elevated and poses further pressures on inflation psychology.

The best way for the central bank to break this nexus is to adopt strong rhetoric and strong action."

"We do not believe that the Board has backed itself into a corner with its surprise, lower than expected 25bp increase at the October meeting. Note the final paragraph in the October Board Minutes: “The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market.”