After new figures showed that inflation spiked 3.5 per cent during 2021, the CBA predicts the Reserve Bank Of Australia will hike the cash rate in August, years ahead of the RBA’s previous indications.
“Our expectation for the labour market to continue to tighten, for wages growth to accelerate and for underlying inflation to push towards the top of the RBA’s target band from here means the risk lies with an earlier hike than August 2022,” CBA Head of Australian Economics, Gareth Aird, says.
“Realistically we think that the RBA will probably want to see two strong quarterly prints on the Wage Price Index (WPI) before hiking the cash rate.
“This means that we think the RBA are unlikely to pull the rate hike trigger before June 2022, that is, the risk of a hike before August in our viewlands with a hike in June, following the Q1 22 WPI, rather than May.
“We retain our view that the hiking cycle will be shallow and favour a terminal rate of 1.25% most likely to be reached around Q2 2023.”
