RBA Preview: Forecasts from 6 major banks

These are the predictions made by the economists and analysts of 6 major banks on the impending central bank’s decision. The Reserve Bank of Australia (RBA) will issue its next monetary policy decision on Tuesday, March 7 at 03:30 GMT.

In March, the RBA is expected to issue another rate increase of 25 basis points, raising the Official Cash Rate (OCR) from 3.35% to 3.60%. The March statement will be scrutinised for any modifications to the wording used by the central bank about the prognosis for wage and rate increases.

SocGen

“We believe that recent signs in the macroeconomic data, such as the decline in inflation, the rebound in the unemployment rate, relatively lukewarm wages growth and the confirmation of consumption slowdown all support a 25 bps hike in March. They also support our base scenario of a terminal policy rate at 3.85%, despite the financial market’s more hawkish expectation on US Fed policy.”

Citibank

“We expect RBA to increase the cash rate by 25 bps to 3.60%. This would be the highest since May 2012 and take monetary policy further into restrictive territory. Citi’s mid-point estimate of neutral is ~ 2.85%.”

Wells Fargo

“We expect the RBA to raise its policy rate by 25 bps to 3.60%, while we also expect a final 25 bps rate hike to 3.85% in April. There could also be interest in this meeting as to whether the RBA hints at any possibility that rate hikes might continue beyond April as well.”

Westpac

“We expect the Board will decide to lift the cash rate by a further 0.25% from 3.35% to 3.6%. We would be very surprised if the Board decided to pause in March. A further hike in April, which is Westpac’s view, seems the logical extension of the February statement. Any policy change to take the recent data into account should be contemplated for May.”

Standard Chartered

“We expect a 25 bps hike to 3.60%. We recently revised the terminal rate to 4.10% from 3.50% previously. Specifically, we expect the central bank to hike by 25 bps each in March, April and May. Trimmed mean CPI inflation eased to 1.7% QoQ in Q4-2022 from 1.9% QoQ in Q3 – still far too high. Inflation pressures are also still very broad – we estimate that 84% of items in the CPI basket are rising by more than 3% YoY. These factors raise risks of a 50 bps hike in March.”

TDS

“The focus will be on whether the RBA softens its language in light of recent weaker data. On the back of the widening breadth and persistence of inflation, the cash rate in Australia remaining below comparable G10 economies, and the Australian economy more likely to benefit from China’s reopening, we expect the RBA to push on with hikes in Apr and May.”