Westpac reaffirms its forecst for a 25bp Reserve Bank of Australia rate hike on July 4

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WPAC are expecting a 0.25% increase in the RBA cash rate at the July 4 meeting, citing:

Tight labour markets, limited progress on reducing core inflation and a pivot in the Board’s reaction function support our forecast for a rate increase in July

  • with a further 0.25% increase to follow in August

With core inflation holding above 6%; the unemployment rate holding nearly 1 ppt below the NAIRU (RBA’s estimate) and the cash rate only around 1 ppt into contractionary territory (we see neutral around 3%) the cash rate will need to go higher.

A second pause, to gather further information, seems unnecessary and only risks the need for the cycle to extend even further into 2023 when the prospects for damage to the economy increase substantially.

Would take the cash rate to 4.35% next week.

This article was written by Eamonn Sheridan at www.forexlive.com. Source