RBA’s hiking cycle may not be concluded yet – Standard Chartered
29.08.2023, 11:44

RBA’s hiking cycle may not be concluded yet – Standard Chartered

Analysts at Standard Chartered note that they have lowered the Reserve Bank of Australia (RBA) terminal rate forecast by 25 basis points but add that the hiking cycle may not be concluded yet.

RBA retained the option to hike further

"We now expect only one more 25bps hike in November vs 25bps hikes each in September and November previously."

"We still expect a hike in November as inflation – while it may have peaked – likely remains too high. There is little margin for error, in our view, considering the RBA’s already-patient stance forecasting inflation to return to the upper bound of its 2-3% target only by 2025. Services CPI remains sticky (services CPI ex-volatile items rose 1.6% q/q SA in Q2 vs 1.3% in Q1)."

"The job market may have peaked but remains tight and should support wage growth. This, along with the monthly rise in home prices, may prop up spending, especially if households dip into their significant excess savings. The lack of a productivity pick-up may also increase unit labour costs, adding to inflation."

"The last RBA policy meeting statement in August slanted dovish, noting that inflation was declining (versus inflation having passed its peak in July). On growth, the central bank indicated that the economy “is experiencing a period of below-trend growth and this is expected to continue for a while”. The meeting minutes were more balanced. The central bank pointed out that the cost of inflation being higher than expected was greater than the cost of inflation being lower than expected, even as risks to inflation were balanced. The RBA also retained the option to hike further.

 

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