Luci Ellis, new Chief Economist at Westpac, believes the inflation overshoot in September was enough to expect an RBA rate hike:
Last week we noted that the RBA would leave rates unchanged so long as they saw inflation coming down as they had expected. But if the data flow showed inflation declining slower than that, they would raise rates. This message was reinforced in the Governor’s first speech, on Tuesday, where she said “The Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation.” The September quarter CPI release was always going to be crucial.
Has the RBA seen enough to move? At 1.2% in the quarter, both headline and trimmed mean inflation was a little higher than the Westpac team expected (see Westpac Senior Economist Justin Smirk’s note). We assessed that it would take a significant upside surprise to induce the RBA Board to raise rates at the November meeting. A 0.1% difference might not seem like a lot, but the underlying detail was sobering.
So yes, I’ve seen enough to make my first-ever rate call to be a prediction of a hike. (Westpac)
Gareth Aird and Stephen Wu at CBA expect the RBA to raise the cash rate by 25bp (to 4.35%) on Melbourne Cup day:
The RBA has a hiking bias. And on Tuesday night, RBA Governor Bullock stated, “the Board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation”.
We are not sure what constitutes a ‘material upward revision’ to the RBA’s inflation forecasts. But we consider the lift in underlying inflation over Q3 23 to be sufficiently strong for the RBA to act on their hiking bias at the upcoming Board meeting. (Commbank Research)
