Westpac (WBC.AX) projected Australia’s cash rate peak to 4.6% on Friday, predicting quarter-point hikes in July and August.
Rates are at an 11-year high of 4.1%, but the Reserve Bank of Australia (RBA) may need more hikes to control inflation. Governor Philip Lowe warned last week that upside risks might disrupt inflation’s return to the central bank’s 2% to 3% objective by mid-2025.
Despite policy tightening, massive labor force data on Thursday showed employment rising over expectations. Markets are betting on a July rate hike and a 4.6% November rate.
“The evidence of strong ongoing momentum in the labour market is sufficient to trigger the ‘considerable risk’ of an August rate hike in our central forecast,” said Westpac’s senior economist Bill Evans.
“Given the higher interest rate path than we expected in March, it is reasonable to have considered an even larger downside revision to our growth forecasts.”
The bank expects 0.6% economic growth this year, down from 1%, and 5.3% unemployment by 2024, up from 3.6% in May.
National Australia Bank (NAB.AX) and ANZ Group (ANZ.AX) economists predicted a 4.6% RBA rate hike.
The Commonwealth Bank of Australia (CBA.AX) expects another raise in August to 4.35%, but its economists indicated a high June 28 inflation figure could change its July stable call.
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