📝Lifting Our RBA Terminal Cash Rate Forecast to 4.10%: Westpac

We have lifted our forecast terminal RBA cash rate from 3.85% to 4.1%.

Since October, we have consistently held the view that the cash rate would peak in May at 3.85%. We still see the date of the peak as May 2023, but now see that peak as slightly higher. The previous view envisaged a 25 basis point hike in March followed by a pause in April with the final hike of 25 basis points in May.

The RBA seems locked in to further hikes in the cash rate in both March and April. The revised forecasts and March quarter inflation report are likely to require a further hike in May. With the concerns about a wage-price spiral easing following the December quarter Wage Price Index report; demand slowing; and the cash rate deeply contractionary, at 4.1%, the case for a pause in June is credible. Further out the next move is likely to be a rate cut beginning in the March quarter 2024.

- Westpac