ANZ has updated its forecast for the Reserve Bank of Australia’s (RBA) monetary policy, now anticipating a 25 basis point increase to the cash rate in May. This revision comes after a series of higher-than-expected inflation figures and a slower deceleration in the January trimmed mean, which registered at 0.8 per cent quarter-on-quarter. The financial institution provides a range of banking and financial products and services to retail, commercial and institutional customers. It operates in Australia, New Zealand, and the Asia Pacific region.
Adam Boyton, Head of Australian economics at ANZ, indicated that while market pricing suggests a more definitive case for a May rate hike, several factors present a more nuanced picture. He noted that the three-month annualised month-on-month rate of trimmed mean inflation is trending downward, and the growth in household spending appears to be moderating.
Boyton also pointed out that year-on-year growth in this series has decreased from 6.3 per cent in November to 5 per cent following December revisions. He said the RBA is not committed to a predetermined policy path and typically prefers to adjust rates following the release of quarterly CPI data, making a move in March seem improbable.
Furthermore, ANZ anticipates that a stronger Australian dollar will likely have a moderating effect on overall economic activity, adding another layer of complexity to the RBA’s decision-making process.
