Bloomberg (article is gated) cite two economists looking for continued aggressive cash rate hikes form the Reserve Bank of Australia.
Credit Suisse equity and macro strategist Yaying Dong sees the Reserve Bank’s cash rate at 4.6% by September
- says as services inflation becomes “much more entrenched.”
- our models suggest that core inflation is just going to take a much longer time to return back to the target unless the RBA were to raise rates more aggressively
- still plenty of growth drivers in the economy
- As long as we experience strong labour force expansion, core and services inflation will continue to print on the upside. And that’s going to be a territory that the RBA is going to be uncomfortable about
Macroeconomics Advisory's Stephen Anthony is forecasting one rate hike in each of Q3 and Q4 of 2023 and Q1 of 2024:
- We haven’t broken the back of inflation expectations
- At 3.85% we’re somewhere near neutral
- increase to 4.6% could be interpreted as just mildly contractionary
- massive fiscal and monetary stimulus delivered during the pandemic ... translated into “really significant savings buffer in the economy” that are helping to “shockproof many households”
I described these two as outliers in the headline to this post, and they are. But, given how very slow the RBA were to catch on to rising inflation and how far behind the curve they got these outliers may well prove to be correct. We'll see.
The RBA rate hike cycle so far:
The next Reserve Bank of Australia meeting is on June 6.
- statement is due at 2.30 pm Sydney time, which is 0430 GMT and 12.30am US Eastern time
Reserve Bank of Australia Governor Lowe is speaking publicly the next day.