SYDNEY: Economists at three of Australia’s “Big Four” lenders expect the central bank to deliver a second consecutive interest rate increase next week as it grapples with persistently strong inflation.
In research notes published yesterday, National Australia Bank Ltd (NAB), Westpac Banking Corp and ANZ Bank predicted a 25-basis-point rate hike to 4.1%, joining similar forecasts from UBS Group AG and Deutsche Bank AG.
Their change of view follows comments from RBA deputy governor Andrew Hauser who said on Tuesday that further inflationary pressure from the war in Iran would be unhelpful.
If the Reserve Bank of Australia (RBA) does raise rates, it would be its first back-to-back increase since May to June 2023.
Rising expectations of tighter policy have helped shield the Aussie dollar from volatility stemming from the Iran war.
It has climbed more than 7% against the US dollar this year, making it the best-performing major currency.
“Given the relatively unfavourable starting point for inflation in Australia and confirmation that the economy is running well above its trend rate of growth, the case for a near-term rate hike is clear,” said NAB’s chief economist Sally Auld, who is predicting a third hike in May.
Her counterpart at Westpac, Luci Ellis, said the RBA’s view that demand still exceeds the economy’s capacity, along with its willingness to respond to a spike in headline inflation to prevent a sustained rise in price expectations, led her to change her call.
“A split vote at next week’s meeting is possible,” said Ellis, a former RBA assistant governor. — Bloomberg
