Our reading of the statement is that the Board believes that further work will need to be done in the near term to allay their concerns around inflationary expectations and wages growth
Despite having increased the cash rate in both May and June we expect that a further rate hike will be required by the Board in July, to really emphasise their commitment to the inflation objective.
Westpac has been expecting the first rate cut in the next easing cycle to come in February 2024 with at least 100bps of cuts over the course of next year. Since that call was made, the Board has now raised the cash rate by an additional 50bps with another 25bp move now expected in in July.
We expect that underlying inflation will have dropped from 6.6% to 6.1% but labour markets will remain tight and the ongoing concerns around wage pressures will persist.
Our current forecast for growth in the Australian economy in 2023 is 1%yr. Since that forecast was issued we have seen a lift in wages growth for certain sectors; higher immigration and a recovery in house prices.
- Westpac
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