📝 RBA Could Hike Cash Rate By 50Bps In August: CBA

Our base case sees the RBA hiking by 25bps in August following a 50bps lift in July. That will see the cash rate target at 2.10% by the end of the 2022 (a level which we consider to be significantly contractionary).  The risk is a higher year end cash rate of 2.35% which could occur with a hike of 50bp in August. The RBA’s reaction function has changed.  In a ‘back to the future’ move the RBA Board will revert to once again being forward looking. Higher rates will take some time to put downward pressure on inflation because there is a lag between changes in monetary policy and the impact on consumer prices. - CBA