RBA Preview: Forecasts from nine major banks, another 25 bp rate hike, but risk is for a pause

The Reserve Bank of Australia (RBA) will announce its next monetary policy decision on Tuesday, April at 04:30 GMT and as we get closer to the release time, here are the forecasts by the economists and researchers of nine major banks regarding the upcoming central bank's decision.

The RBA is set to deliver another 25 basis points rate hike in April, lifting the Official Cash Rate (OCR) from 3.60% to 3.85%. A pause also seems prudent considering the inflation trend and the uncertainty.

Rabobank

“It remains our view that the RBA will hike by a further 25 bps in April to take the cash rate to 3.85% ahead of a possible pause in May. The softer headline inflation print for February will not be sufficient for the RBA to abandon their tightening bias as labour market indicators, forward indicators and the still comparatively high level of inflation all point to the need for further tightening.”

ANZ

“While our central case is for a 25 bps hike in April, the probability of a pause is the highest it’s been in some time. The RBA may take this option to assess the impact of rate hikes so far, given the ‘long and variable’ lags in monetary policy, along with recent global developments. We still see the question as not one of ‘where’ the cash rate peaks at (we still favour 4.1%), but ‘when’.”

ING

“We believe the RBA will leave the cash rate target unchanged at 3.6%. The RBA hinted at its most recent rate-setting meeting that it was looking at a possible pause in rates, and these inflation numbers provide the perfect excuse. We are reserving judgement on whether this marks the peak for cash rates in this cycle. Other data, including from the labour market, could swing this decision one way or the other. Markets are, however, currently betting that 3.6% marks the peak.”

Standard Chartered

“We expect the RBA to hike again by 25 bps to 3.85%. That said, the risk of a pause has risen substantially since the last March meeting. With the policy rate at only 3.6%, we may not even get to a real positive real rate by the end of 2023. Hence, we maintain our rate hike call for April.”

TDS

“We now expect the Bank to pause at the April meeting given the lower Jan-Feb CPI prints and uncertainty over the outlook from the banking turmoil in the near-term.”

SocGen

“We expect the RBA to hold the cash rate target unchanged at 3.60%. The RBA will likely say that it is appropriate to pause interest rate increases to allow more time to assess the state of the economy, mentioning the recent development in the macroeconomic data and the global economy.” 

NAB

“We think the data justifies another 25 bps hike, but acknowledge it is a line ball decision with the RBA having signalled that they would ‘reconsider’ the case for a pause. The risk is the RBA pauses and retains a hiking bias, preferring to err on the side of a more protracted battle against inflation until or unless its hand is forced by the data. Governor Lowe is speaking on Wednesday, an opportunity to explain the decision.”

Citi

“For the first time since the beginning of its hiking cycle in May 2022, we expect the RBA to leave the cash rate unchanged. The shift in the view largely stems from softer-than-expected monthly CPI for both January and February. The official quarterly inflation reading will be reported at the end of April, and given the two soft monthly inflation indicator prints, we believe the Bank will now take the option to pause hiking and re-assess the inflation over the next month. However, even with a pause in April, we still expect the Governor’s statement to maintain a tightening bias.”

Wells Fargo

“Given the recent decline in inflation as well as previous dovish RBA comments, we expect a pause.”