PHOTO: Westpac. FILE
Westpac currently stands alone as the sole bank anticipating the need for the Reserve Bank to once again raise the official cash rate (OCR) in order to rein in inflation.
In contrast, ANZ announced on Friday a revision to its forecast, no longer anticipating the central bank’s resumption of rate hikes early next year, though it acknowledged that such increases remained a “significant risk.” ANZ now projects the OCR to remain unchanged at 5.5% until a potential cut in February 2025.
The bank cited mixed recent data, but acknowledged that overall trends favored the Reserve Bank, particularly in the labor market, which appeared to be evolving more rapidly than initially predicted by both ANZ and the Reserve Bank.
ANZ clarified that it no longer viewed the probability of a rate hike as exceeding 50%, placing a higher OCR in the risk category rather than its central forecast. Despite adjustments to their estimates, ANZ asserted that rate cuts remained a distant prospect, pushing back the anticipated timeframe for such measures by one quarter.
The bank also highlighted the challenge the Reserve Bank would face in effectively communicating its forecasts to a market eager to price in more aggressive cuts.
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Westpac’s chief economist, Kelly Eckhold, mentioned that their OCR forecast would be released the following week but did not disclose whether it might include a modification to the prediction for another rate hike. He emphasized the need to consider the overall economic outlook, noting that recent inflation data, although slightly lower than expected, prompted an adjustment to their Consumer Price Index (CPI) forecast.
Eckhold pointed out that there were still compelling reasons for a potential rate hike, suggesting that some unexpected declines in inflation might be temporary, effectively borrowing from the anticipated disinflation. Additionally, robust recent rent data and persistent migration pressures were factors that could necessitate a rate increase.
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SOURCE: STUFF