HSBC has revised its forecast for the Reserve Bank of Australia’s (RBA) next move, now anticipating a rate hike in the latter half of next year. This adjustment comes after HSBC previously pushed forward its rate increase expectations from 2027. The shift reflects growing concerns about persistent inflation despite the RBA’s efforts to manage it. HSBC Australia chief economist Paul Bloxham noted the unexpected resurgence of inflation as a key factor influencing this revised outlook.
Bloxham suggested that the RBA might have already eased monetary policy excessively. However, HSBC believes the central bank will likely wait for the unemployment rate to peak before implementing any rate hikes. The primary catalyst for this reassessment was the surprisingly high consumer price index (CPI) data for the third quarter. This data prompted a review of Australia’s economic balance between demand and supply, leading to the conclusion that growth is outpacing the economy’s potential.
The unexpected CPI figures indicate that the Australian economy may be operating beyond its sustainable growth rate, or its ‘speed limit’. This assessment underscores the challenges faced by the RBA in maintaining price stability while supporting economic growth. HSBC’s updated forecast highlights the increasing likelihood of further monetary tightening measures in the near future to address inflationary pressures.
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