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RBA Could Hike Interest Rates Anytime From June, ANZ Economists Say

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(Bloomberg) — The Reserve Bank of Australia could announce an interest-rate increase at any of its meetings from June onwards, given the timing of wage data and a pending election, economists at two of the nation’s major lenders said.

“Our call is that the first rate hike will come in September. But given the risk to wages that could come as early as June, every meeting from June is live,” said Felicity Emmett at Australia & New Zealand Banking Group (OTC:ANZBY) Ltd. “It’s really more about the timing of the wages report.” 

Commonwealth Bank of Australia’s Gareth Aird echoed that view, adding another factor that could help shift the rate dial is that a federal election — due by May — will be out of the way. Aird’s official forecast is for an August hike. The pair spoke on a panel at an Australian Business Economists event.

The suggestion that the June policy meeting is “live” dovetails with market pricing for rate liftoff that month. It comes after RBA Governor Philip Lowe acknowledged last week that there is a “plausible scenario” for the cash rate to rise this year, in the event wages growth accelerates and ensures inflation is sustainably within the bank’s 2-3% target.

RBA’s Lowe Flags Rate Rise Possibility This Year for First Time

Underlying inflation is already within that range, fueled by rising costs caused by Covid-induced supply chain blockages that are expected to abate as virus cases subside.

Australia’s wage price index for the final three months of 2021 will be released Feb. 23 and  data for the first quarter is due out on May 18. In a quirk of timing, first-quarter gross domestic product — which also contains labor cost figures — will also be released before the RBA’s June meeting, giving the board extra information on the $1.5 trillion economy.

Those data points are all likely to point to price pressures in the economy climbing to a sustainable level that could prompt the RBA to turn hawkish, Emmett and Aird said. 

Former RBA board member John Edwards said he expects the RBA to raise rates four times in succession late in 2022, according to an interview with Dow Jones.

Concern about looming rate hikes have already rattled Australia’s highly indebted households, with ANZ’s weekly gauge of consumer confidence falling 1.9%. It also showed that views on “future financial conditions” had dropped 3.5% to a 15-1/2 month low. 

©2022 Bloomberg L.P.

RBA Could Hike Interest Rates Anytime From June, ANZ Economists Say

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