From WPAC's latest: 'Market themes for 2023 and 2024'
On the Reserve Bank of Australia December meeting:
- (Lowe) maintained the guidance used in the last two meetings, that “the Board expects to increase rates further in the period ahead” although adding “but is not on a pre-set course.” That term has been used in previous communications and does not detract from the interpretation that the statement carries a strong tightening bias.
Westpac expect the RBA cash rate to reach 3.85% by May next year:
- Forces we expect will require that higher rate by May include evidence of very high inflation prints for both the December and March quarters. Our current forecasts are: 7.5% for the December quarter (6.7% underlying) and 6.6% for the March quarter (6.5% underlying).
- the Board will be cautious given that wage increases will be intensifying in the first half of 2023 and some components of inflation – particularly services – will remain a challenge while the need to anchor inflationary expectations in the face of such high inflation prints will be ongoing.
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The RBA so far in this hiking cycle:
