RBA Likely to Start Rate Cuts Earlier than Expected, Westpac Says
The Reserve Bank of Australia (RBA) is likely to start cutting rates in August 2027 instead of early 2028 as previously forecast but may remain hawkish in the near term, Westpac said in a note on Friday. The lender expects the central bank to hike rates in August, subject to confirmation once the June quarter consumer price index data are released, and added that a follow-up rate hike in September is the most likely outcome. The monetary policy board continues to believe that the economy is too tight and requires a period of below-average growth to get inflation under control, Westpac noted. The board also assesses that the oil price and other supply shocks worsen this trade-off by lowering supply capacity. Westpac said its revised forecasts imply underlying inflation will not exceed RBA's May forecasts in the second half of the year by as much as earlier forecasts implied.
The Reserve Bank of Australia (RBA) is likely to start cutting rates in August 2027 instead of early 2028 as previously forecast but may remain hawkish in the near term, Westpac said in a note on Friday.
The lender expects the central bank to hike rates in August, subject to confirmation once the June quarter consumer price index data are released, and added that a follow-up rate hike in September is the most likely outcome.
The monetary policy board continues to believe that the economy is too tight and requires a period of below-average growth to get inflation under control, Westpac noted.
The board also assesses that the oil price and other supply shocks worsen this trade-off by lowering supply capacity.
Westpac said its revised forecasts imply underlying inflation will not exceed RBA's May forecasts in the second half of the year by as much as earlier forecasts implied.