Earlier in the week we had the first RBA cash rate hike for over 11 years:
- RBA raises cash rate by 25 bps to 0.35%
- A cheeky move by the RBA helps to lift the aussie
- RBA's Lowe: Expects that further rate hikes will be necessary in the months ahead
- RBA's Lowe: A more normal level of rates would be 2.50%
Since then we have had some updated analyst forecasts:
- Goldman Sachs is forecasting the RBA cash rate at 2.6% by the end of 2022
- Westpac forecast a 40bp cash rate hike from the RBA on June 7
Headlines from today's SoMP via Reuters:
- further increases in interest rates needed to restrain inflation
- sharply raises inflation forecasts, sees core inflation above 2-3% band until 2024
- says appropriate to start normalising interest rates
- says inflation pressures broadening due to supply chain bottlenecks, strong demand
- says more firms expect materially higher wage costs, difficulty in finding workers
- says the economy has been more resilient than expected, nearer to full employment
- forecasts trimmed mean inflation at 4.6% Dec 2022, 3.1% Dec 2023, 2.9% June 2024
- forecasts CPI inflation at 5.9% Dec 2022, 3.1% Dec 2023, 2.9% June 2024
- forecasts unemployment 3.7% Dec 2022, 3.6% Dec 2023, 3.6% June 2024
- forecasts wage growth 3.0% Dec 2022, 3.5% Dec 2023, 3.7% June 2024
- forecasts gdp growth 4.2% Dec 2022, 2.0% Dec 2023, 2.0% June 2024
- forecasts assume cash rate of 1.75% Dec 2022, 2.5% Dec 2023
- says outlook for business/govt investment positive but constrained by capacity, supply chains
- says Australia terms of trade to reach new peak in mid-2022, stay high for longer
- says Australian dollar around where it was at start of year despite
Check out the core inflation forecasts - to stay above the top of the target band ( 2 to 3%) for a good time to come (out to December 2023 ... which didn't quite make it into the box I drew .... sorry 'bout that!)
But ... the range of forecasts show it could be MUCH higher (and therefore more rate hikes if so):
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