Economists are increasingly confident that a rate hike is imminent, with a March rise now considered 'highly likely' following the Reserve Bank of Australia's (RBA) Governor, Michele Bullock's, recent comments. Bullock's statement at the March meeting that a rate hike was a 'live' possibility has prompted economists to revise their forecasts.
CreditorWatch's chief economist, Ivan Colhoun, predicts a 0.25% interest rate increase at the RBA's upcoming meeting in two weeks, a significant shift from his previous stance. Colhoun attributes this change to Bullock's remarks, emphasizing the likelihood of a March rate hike.
The RBA's decision is influenced by persistent inflation and employment challenges. Colhoun highlights that inflation remains above target and is not expected to reach the 2-3% range until mid-2027. A March rate hike would elevate the official cash rate from 3.85% to 4.1%.
Bullock's clarification regarding her use of the term 'patient' last week further supports the need for more data collection. Since the February interest rate rise, the January CPI has exceeded the RBA's inflation forecast, and the unemployment rate has stabilized at 4.1%, a level deemed 'tight' by the RBA.
Colhoun's prediction is not isolated; other economists, including Kieran Davies from Coolabah Capital, share a similar outlook. Davies notes a shift in the governor's messaging, favoring a rate hike this month or a majority vote among policymakers. Coolabah Capital's economic outlook suggests that persistent inflation may lead the RBA to raise the cash rate to 4.25% to 4.75%.
The RBA board's schedule includes a meeting on March 16-17, skipping April, and reconvening on May 4-5, ahead of the federal budget on May 12. This timing underscores the urgency of the economic situation and the potential for a swift response from the RBA.
