Bond prices and shares sold-off after a hawkish RBA disappointed investors who had wagered on a more moderate tone hinting at a policy pause.
had tipped an increase. JPMorgan was the only respondent betting on a hold.
“Overall, the RBA remains hawkish – understandably, given the size of the inflation challenge and resilience/buffers across the economy,” said Andrew Boak, chief economist for Australia at Goldman Sachs. He predicts the cash rate to climb to 4.1 per cent by May. CBA and RBC Capital Markets upgraded their cash rate forecasts to a top of 3.85 per cent, from 3.6 per cent.“Inflation is uncomfortably high, and the renewed focus suggests the RBA will move policy settings to a more restrictive stance,” said Su-Lin Ong, chief economist for Australia at RBC. She penciled in follow-on moves in March and April.A big test for the RBA will be the December quarter wage price index report due later this month.
Bond markets are now implying the cash rate will peak at 4 per cent in August, from 3.8 per cent before the policy decision.“Inflation data in the months ahead is going to moderate enough for the RBA to pause,” said Mr Hext. He described March as a “done deal” with another quarter-point lift: “By April, they will have another CPI number which will be a fair bit lower and that will give them the ability to pause.”The RBA reiterated its forecast of around 1.
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