RBA to hike by 25bps next week, in November and December – Wells Fargo

The Reserve Bank of Australia (RBA) will have its monetary policy meeting next week. Analysts at Wells Fargo look for the central bank to hike by 25 basis points at its October meeting and they expect two more 25 bps hikes in November and December.

Key Quotes: 

“We expect the central bank to deliver a 25 bps hike, bringing the Cash Rate to 2.60%. In September, the RBA raised its Cash Rate by 50 bps to 2.35% and signaled that further rate hikes would be needed to bring inflation back to target, repeating that policy is not on a pre-set path. In our view, the announcement had a less hawkish tone than prior announcements. The RBA dropped previous wording that rate hikes were a further step in the normalization of monetary conditions, which could indicate that the central bank believes monetary policy is close to neutral, and any further moves could be seen as moving toward restrictive territory.”

“In another less hawkish comment, the RBA said the path for bringing inflation back to target while keeping the economy on an even keel is "narrow" and "clouded in uncertainty." This cautious tone leads us to believe the RBA will move in smaller magnitude rate hikes going forward. More specifically, after a 25 bps hike at its October meeting, we expect two more 25 bps hikes in November and December, bringing the Cash Rate to 3.10%.”