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Rates will rise faster than most expect

The RBA started its hiking cycle at its meeting this week. While the Governor indicated that the Bank was likely to stick to 25bp hikes in the near term, we think the Bank will hike by a larger 40bp in August after another upside surprise in the Q2 CPI data. Along with 25 bp hikes at every other meeting this year that would take rates to 2.25% by the end of this year. And we now think rates will peak at 2.75% next year, much higher than the consensus expects. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.
Ben Udy Australia and New Zealand Economist
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RBNZ Watch

RBNZ tightening cycle will stop by year-end

Rising interest rates are weighing on the housing market but economic activity is holding up and inflation has continued to accelerate. The upshot is that the Reserve Bank of New Zealand will hike interest rates by another 50bp at the upcoming meeting on 17th August, but we expect smaller 25bp across Q4.

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Australia & New Zealand Economics Weekly

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Australia & New Zealand Data Response

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4 August 2022

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Australia & New Zealand Data Response

Australia International Trade (Mar. 2022)

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5 May 2022

Australia & New Zealand Data Response

New Zealand Labour Market (Q1 2022)

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Australia & New Zealand Economics Weekly

RBA will hike by 15bp next week

Inflation is now surging in Australia and that surge is spreading well beyond the impact of soaring commodity prices. We therefore think the RBA needs to begin tightening policy. The RBA might want to avoid politicising its decision and wait until after the federal election in May. But with a number of politicians voicing their opinion on rate hikes, the RBA should demonstrate its independence by ignoring the politics and focusing on the economic data. We now think the Bank will kick off its hiking cycle with a 15bp hike in May.

29 April 2022
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