Expecting a “much higher inflation glut,” Goldman Sachs analysts see the Reserve Bank of Australia (RBA) raising key interest rates in August and September this year.
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“It is expected that the increase in fuel prices for the Russian invasion of Ukraine along with disturbances related to major floods throughout the east coast of Australia lift headline CPI annual growth to 5.3% in June 2022.”
“It looks median inflation trimmed accelerating to 3.9% and remaining above the RBA’s 2-3% target range through early 2023, from 2.6% seen in late December.”
“Given this combination of much higher excess inflationbut manageable risks to growth now we expect the RBA to deliver back-to-back rate hikes in August and September“.
‘The RBA will adopt’more than one risk management posture‘ over concerns that structurally higher commodity prices will lengthen supply-side pressures world and unanchored inflation expectations.
“A third rate hike is seen in November and predicts the RBA will end its tightening cycle by Q3 2024 with a 2.50% cash rate“.
Source: Fx Street
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