The Reserve Bank of Australia (RBA) is set to announce its next policy decision on Tuesday, June 7 at 04:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of eight major banks regarding the upcoming central bank's decision.
The RBA is expected to hike the cash rate for a second consecutive month. Market participants are split on whether the central bank will pull the trigger by another 25 bps or if it will go with a 40 bps upswing.
ANZ
“We expect the RBA to raise the cash rate by 40 bp. The RBA could confound us all and decide to go by 50 bp, but we think the fact a 40 bp move was discussed in May makes it a more likely choice. More than 50 bp seems unlikely given that the RBA meets monthly. We can’t rule out the RBA sticking with a cautious approach and tightening by 25 bp, but with policy still exceptionally stimulatory we think a bigger move of 40 bp is more likely.”
OCBC
“We have expected the RBA to deliver a 40 bp hike at one of the upcoming meetings, which will bring the policy rate level back to a multiple of 25 bp. As the RBA is already behind the curve, this expected 40 bp hike will probably arrive sooner rather than later, at the June MPC meeting.”
Standard Chartered
“We expect the central bank to hike rates steadily by 25 bps through the year. The key question is whether the RBA may hike by more than 25 bps. We favour a 25 bps move as the May hike was already pre-emptive. In addition, the RBA has a meeting every month (except January), which offers more room for it to hike rates in a more calibrated manner, particularly considering that it has been cutting rates since 2011 and a more measured adjustment may avoid unlimited volatility for households and companies as they adjust to higher interest rates.”
Westpac
“Immediately following the Board’s decision to raise the cash rate by 25 basis points in May we argued that the correct policy decision for June 7 would be to raise the cash rate by a further 40 bps. By lifting the cash rate by 40 bps from 0.35% to 0.75%, the Board would be fully unwinding the emergency rate cuts we saw in 2020 during the Covid crisis. Clearly, that emergency has passed and there is no justification to maintain an extreme emergency policy stance. We believe that the Board will make that correct decision.”
Danske Bank
“We expect the RBA to continue its hiking cycle with another 25 bps hike, but following recent 50 bps hikes by the Fed, Bank of Canada and the RBNZ, risks are tilted towards a larger hike also in Australia.”
TDS
“The risks to inflation lean towards the upside and we expect the RBA to hike by 40bps to address this. With the economy on a stronger footing, we think the RBA can afford to take larger policy steps to tame inflation.”
UOB
“We recognise that a 40 bps hike at this meeting is a close call, but this is not our base case. We see the RBA hiking by 25 bps to 0.60% in June, and for now, another 65bps in the remainder of 2022, which would bring the OCR to 1.25% by year-end. Further out, we look for the OCR to rise over 2023 and 2024, reaching 2.50% by the end of our forecast period.”
SocGen
“We expect the RBA to increase the cash rate target from 0.35% to 0.60%. The RBA is likely to continue to say that it is committed to doing what is necessary to ensure that inflation returns to target over time, which suggests that the policymakers are in the process of monetary policy normalization. The RBA will likely maintain its upbeat outlook on economic growth and labour market, as well as reiterating its concerns about rising inflation that is increasingly driven by domestic capacity constraints.”
