A note from Australian bank Westpac with their FOMC and RBA outlook for this year.
Main points:
- Inflation is expected to ease substantially in both Australia and the US in 2023.
- However, the key services inflation cycle looks to be ahead for Australia while it is slowing in the US.
- Wage inflation in Australia is still lifting as labour markets remain tight through the first half of the year. Headline inflation in Australia will also be held up in 2023 by rising gas and electricity prices.
- both the Federal Reserve and RBA have more work to do before remaining on hold in the second half of 2023.
- With Australia’s inflation cycle behind the US and both central banks facing much higher, albeit slowing, inflation than their target levels it seems appropriate that they will continue to tighten through the early months of 2023.
- We expect that the FOMC’s tightening cycle will peak at the March FOMC meeting while the RBA will persist for a little longer with the peak being in May.
Westpac expect that headline inflation in Australia will peak at 7.4% in 2022 (December quarterly result to be released on January 25).
-
This snippet pic below from the Reserve Bank of Australia website is enough to convince me that the RBA is not done hiking rates. The next meeting is February 7. I expect a +25 hike from the Bank then.
