Morgans Australia expect 25bps each month all the way to August 23, i.e 6 more 25bps rate hikes = 150bps +current 3.35=4.85pc terminal rate. Wow! But consensus seems to be 2 more 25bps increases in Australia to 3.85pc cash rate.
RBA does not seem to know where it is heading, where inflation could land and where rates could really go...they have no clue...are they serious about inflation, if so how serious, to the point of jeopardising the housing market, surely not.
Australian households cannot expect how much more pain ahead. If they are, they could reduce consumption quite drastically and send the economy into a tailspin. ASX is not prepared as well.
------------
Commonwealth Bank head of Australian economics Gareth Aird lifted his terminal rate forecast to 3.85 per cent from 3.35 per cent. And Morgans chief economist Michael Knox said RBA tightening was “far from complete”, upping his cash rate forecast to 4.85 per cent by August.
NAB head of market economics Tapas Strickland believes the RBA has revealed itself to be less tolerant of inflation running above target, projected to linger above its 2 to 3 per cent band until the second half of 2025.
He says there is now a risk that the cash rate goes as high as 4.1 per cent as the board abandons the pause signalling featured throughout its late-2022 statements.
“Last year it seemed the RBA was willing to run the risk of inflation becoming more entrenched in order to keep the gains they’d seen in the labour market during the pandemic,” he said.
“There’s been a change in how they’re evaluating those risks stemming from the Q4 CPI data which suggested more entrenched inflation in the economy. This has driven a wholesale review of the willingness to balance the risks of running a recession or subpar growth versus getting inflation back to target.”
Forecasters hoped Australia would be spared from the cash rate levels expected for other developed economies with its highly leveraged households.
