Invest
Economists predict RBA to hike rates in Q3
The RBA is likely to begin hiking the cash rate in the third quarter, an expert has predicted.
Economists predict RBA to hike rates in Q3
The RBA is likely to begin hiking the cash rate in the third quarter, an expert has predicted.
The HSBC expects the Reserve Bank of Australia to begin hiking its cash rate in the third quarter on the back of a significant upside surprise in local inflation and with the sharp rise in US inflation as a backdrop.
In a statement on Tuesday (15 February), the HSBC predicted the RBA would lag the Fed and would only gradually lift its cash rate with 50 basis point hikes in the second half.
The US, however, is expected to see much steeper inclines, with Ryan Wang, HSBC’s US economist, tipping the Fed to hike its policy rate by 150 bps in 2022 and by 50 bps in 2023, kicking off with a likely 50 bps move next month.
In Australia, core inflation lifted to 2.6 per cent, where the RBA had expected 2.25 per cent. The central bank updated its own forecasts significantly, with underlying inflation rising to above the 2-3 per cent target band in the first half of 2022 before falling back to 2.75 per cent by late 2022.
“As we have pointed out previously, in the past, this would have been enough to get the RBA to start lifting its cash rate already. But the RBA’s reaction function has changed,” Paul Bloxham, HSBC’s chief economist for Australia, said.
“After a long period of below target inflation, the RBA seems keen to run the economy ‘hot’ for a while,” Mr Bloxham said.
He believes the RBA is looking to reset CPI inflation and wage expectations, such that wage rises of 3-4 per cent become the “norm”, after many years of wages growth averaging 2 per cent.
However, Mr Bloxham flagged considerable uncertainty in the economic figures at present, noting that it has been harder than usual to decipher how much underlying inflationary pressure is actually there.
Equally though, he noted, a cash rate at 0.10 per cent “is very low and a long way from normal”.
“Rate hikes in H2 2022 seem likely, rather than just plausible,” he said.
RELATED ARTICLES
About the author
About the author
Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more
Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more
Economy
Co-ops and mutuals boost revenue to $43.2 billion despite economic challenges
Australia's top 100 co-operative and mutual businesses have posted a record performance in the 2023 financial year, growing total revenue by 16.1 percent to $43.2 billion. Read more
Economy
Fed decision set to pressure emerging market central banks to hike rates
The Federal Reserve's expected decision to maintain US interest rates at a two-decade high at its sixth consecutive meeting on Wednesday is set to put pressure on emerging market central banks to hike ...Read more
Economy
Fed keeps rates steady, signals higher for longer amid elevated inflation
The Federal Reserve kept interest rates unchanged at its May meeting and signaled that rates are likely to stay higher for longer given elevated inflation in the first quarter, while also announcing a ...Read more
Economy
CPI data another piece in RBA's interest rate decision puzzle, says REIA
The latest Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) shows that inflation rose 3.4% in the 12 months to February 2024, unchanged from the previous two months, ...Read more
Economy
Including passive job seekers in unemployment measure doesn't impact economic cycle view, study finds
New research from e61 Institute has found that while current unemployment measures may not capture all job seekers, broader definitions that include passive job searchers do not provide better ...Read more
Economy
Survey reveals heightened job security concerns among IT workers in 2024
A recent survey conducted by Authority Hacker has revealed that 89.66% of IT workers in the United States have increased concerns about job loss in 2024. Read more
Economy
Australian inflation continues downward trend, nearing RBA target
The Australian Bureau of Statistics (ABS) has reported that the Consumer Price Index (CPI) rose 2.7 per cent in the year to August, down from 3.5 per cent in July and 3.8 per cent in June. Read more
Economy
UK markets poised for gains after election, global geopolitical risks remain
Chris Iggo, Chief Investment Officer at AXA Investment Managers, has provided an optimistic outlook for UK markets following the recent general election, while cautioning about ongoing global ...Read more
Economy
Co-ops and mutuals boost revenue to $43.2 billion despite economic challenges
Australia's top 100 co-operative and mutual businesses have posted a record performance in the 2023 financial year, growing total revenue by 16.1 percent to $43.2 billion. Read more
Economy
Fed decision set to pressure emerging market central banks to hike rates
The Federal Reserve's expected decision to maintain US interest rates at a two-decade high at its sixth consecutive meeting on Wednesday is set to put pressure on emerging market central banks to hike ...Read more
Economy
Fed keeps rates steady, signals higher for longer amid elevated inflation
The Federal Reserve kept interest rates unchanged at its May meeting and signaled that rates are likely to stay higher for longer given elevated inflation in the first quarter, while also announcing a ...Read more
Economy
CPI data another piece in RBA's interest rate decision puzzle, says REIA
The latest Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS) shows that inflation rose 3.4% in the 12 months to February 2024, unchanged from the previous two months, ...Read more
Economy
Including passive job seekers in unemployment measure doesn't impact economic cycle view, study finds
New research from e61 Institute has found that while current unemployment measures may not capture all job seekers, broader definitions that include passive job searchers do not provide better ...Read more
Economy
Survey reveals heightened job security concerns among IT workers in 2024
A recent survey conducted by Authority Hacker has revealed that 89.66% of IT workers in the United States have increased concerns about job loss in 2024. Read more
