CBA is tipping the Reserve Bank of Australia to cut rates ... in late 2023

Commonwealth Bank of Australia head of Australian Economics Gareth Aird is projecting plenty of RBA rate hikes soon.

Says the 50bp rate hike yesterday is:

• a really radical shift in a very short amount of time

Aird forecasts:

• we think they'll deliver another 50 basis points in July.
• Then, we've got 25 pencilled in ,,, for August ... there's a risk that we get a big Q2 CPI number, and they want to deliver another 50 basis points. That would be very aggressive tightening.
• Then we've got a couple more 25s over the second half of this year to see the cash rate in the year at 2.1%. The risk there is that they do a little bit more and take it to 2. 35%.

And then ...

• That's then when you're talking about monetary policy slowing the economy down and generating an increase in unemployment, which we think will start to come through this year.
• Without kind of getting too cute on it here, we've actually put out a call now today that we think the RBA will end up taking the cash rate back down in late 2023 simply because it looks like they're going to front load the tighten cycle such that the economy will probably be slowing quite a bit now into 2023.

Aird says the situation "is fluid".

• There's so much going on in the economy. We've come out of a pandemic into a booming economy that has clearly generated higher inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term, a very tight labor market but, suddenly we've now got a central bank, not only normalizing the cash rate, but seeming very intent to do it as quickly as possible now. I think that makes our job trying to pick where things are going that little bit harder.

Nevertheless, makes the call out to late 2023. Brave stuff.

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