By Devayani Sathyan
BENGALURU (Reuters) – Australia’s central bank will likely deliver one more 25-basis-point interest rate increase by end-September to 4.10% following a surprise hike on Tuesday, according to a slim majority of economists in a snap Reuters poll.
The Reserve Bank of Australia, which apologized last year for providing unclear guidance, has sent mixed signals in recent months over its inclination to hike rates further or pause, although Governor Philip Lowe said on Tuesday the Bank was “dead serious” about getting inflation under control.
On May 2, the RBA startled economists and financial markets with a hike. The vast majority expected no change, having taken cues from the April meeting when the central bank paused policy amid slowing inflation.
“The month-to-month pivots in RBA communication this year have made it difficult to extrapolate meeting communication – but we have consistently expected that further hikes would be required from the RBA,” wrote Chris Read, Australia economist at Morgan Stanley.
“We keep our forecast for a 4.1% terminal rate. Our expectation is that the final rate hike occurs in August. However, we would flag there are key catalysts that could see this hike come earlier in either the June or July meetings.”
Just over half of the economists surveyed in the Reuters poll, 13 of 25, expected the RBA will add at least 25 basis points to its official cash rate by end-September, with the median putting it at 4.10%.
The remaining 12 expected it to remain at 3.85% as does market pricing.
Reuters Poll: RBA monetary policy and inflation outlook, https://fingfx.thomsonreuters.com/gfx/polling/zjvqjdobypx/Reuters%20Poll%20RBA%20monetary%20policy%20and%20inflation%20outlook.PNG
Over 85% of respondents, 25 of 29, expected no hike from the central bank at its June 6 meeting, while four predicted a 25 basis point hike.
Among major local banks, only ANZ forecast a 25 basis point hike in Q3 while Westpac and CBA predicted an extended pause.
“The RBA retained its tightening bias when it lifted the cash rate by 25bp, but we suspect that it won’t raise interest rates any further over the coming months,” noted Marcel Thieliant, head of Asia-Pacific at Capital Economics, one among the small minority who correctly predicted Tuesday’s outcome.
Median forecasts showed the cash rate remaining at 4.10% until year-end, 25 basis points higher than the peak expected in an April poll.
The latest poll was conducted ahead of a meeting of the U.S. Federal Reserve on Wednesday, when it was expected to raise rates by 25 basis points.
Based on the central bank’s latest forecasts, inflation was projected to fall within the RBA’s targeted range in mid-2025, around a year later than expected in a separate Reuters poll.
(Reporting by Devayani Sathyan; Polling by Anant Chandak; Editing by Ross Finley, Jonathan Cable and Bernadette Baum)
