ANZ is expecting the Reserve Bank of Australia (RBA) to hike rates by 0.40 per cent to 0.75 per cent at its next meeting on Tuesday.
The big four bank upgraded its prediction following the release of Wednesday’s national accounts data, which showed an acceleration in average hourly wages.
In a Twitter update, ANZ said: “After the sharp acceleration in average hourly wages in Australia's #GDP report today, we expect the #RBA to lift the cash rate by 40bp at its June meeting.”
The RBA lifted rates for the first time in over a decade at its May meeting in a response to a significant lift in inflation.
"The board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic," governor Philip Lowe said at the time.
A further hike is now expected on 7 June when the board meets again.
Last month, the central bank revealed a 40-bp hike was on the cards in May given the upside risks to inflation.
Economists widely expect the RBA to continue to hike rates until they reach a minimum 1.75 per cent by the end of 2022.
According to Barclays, next week’s hike will be followed by a further 90-bp hikes in the third quarter, taking the interest rate to 1.5 per cent, at which points the RBA is expected to assess the macroeconomic data.
“We see one further increase in Q4, with the cash rate reaching 1.75 per cent by the end of 2022. We expect the OCR to end this cycle at 2.0 per cent by Q123,” Barclays said in an update on Wednesday.
Conversely, AMP’s Shane Oliver expects the negative wealth effect from falling home prices to limit how much the RBA ends up raising rates.
“If house prices start to fall rapidly with significant evidence of rising mortgage stress then the RBA will be able to ease up on the interest rate brake,” Dr Oliver said.
He explained that the fact that prices are already starting to fall means that rate hikes are already getting traction, suggesting that the RBA may not have to raise rates as much as would otherwise be the case. He foresees the peak in the cash rate being 2 per cent rather than the 3 per cent plus that the money market is predicting.
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
