Economists changed RBA cash rate forecasts, raising expected value to 3.1% towards end of year

There was an increase in economics experts’ projections for policy tightening by the Reserve Bank of Australia. It was connected with a rise of an expected level of household spending, which, in its turn, is linked to tight conditions of the labor market and a growing level of savings.

According to projections collected in a recent survey by Bloomberg, the median estimated amount of expected RBA rate hike is by 75 basis points over the last quarter of the current year to the level of 3.1%, while the previous median estimate was by 2.85%.

The highest value of the first quarter is currently forecasted to reach the level of 3.35% after a notable rise of consumption projections.

As it was noted by Steven Roberts from Laminar Capital, the experts suggest another RBA cash rate hike by more than 3% taking place in a designated period of time due to tough pressure of annual inflation, which has also risen above 3%. According to his words, this might cause a significant slowdown of economic growth.

One of the sharpest processes of tightening over the years is currently occurring in the Central Bank of Australia, which is reflected by half-percent cash rate hikes performed over the last four meetings. As a result of this, the cash rate has reached the level of 2.35%. As it was stated by the bank’s Governor Philip Lowe, there’s a certain possibility of decreasing the volume of rate hikes in the future, but some economists believe that this kind of change might happen no earlier than in November.

Updated data on inflation in the third quarter is planned to be released on October 26 by the statistics bureau. As experts suggest, this information will reflect the continuing speeding up of prices. At the same time, the peak value of little less than 8% is forecasted by the RBA to be reached some time later in the current year. Expected inflation levels have also been raised by economists to 7.4% for a period of the current year’s closing months.

Source: Bloomberg