Janus Henderson suggests the Reserve Bank of Australia (RBA) is poised to increase interest rates more aggressively than current market predictions anticipate. Fixed interest strategist Emma Lawson noted that the RBA commenced its tightening cycle in February, increasing the cash rate by 25 basis points to 3.85 per cent, which has prompted money markets to factor in additional rises. Janus Henderson is a global asset manager dedicated to helping clients define and achieve superior financial outcomes through differentiated insights, disciplined investments, and world-class service. The company manages investments across a full spectrum of asset classes.
Recent economic data indicates persistent inflationary pressures. Headline inflation remained steady at 3.8 per cent, while trimmed mean inflation increased to 3.4 per cent. These figures reinforce the central bank’s apprehension regarding ongoing price pressures and their potential impact on the economy.
Lawson stated that their primary scenario involves the RBA further increasing rates. She also noted the risk that the hiking cycle could extend beyond current market expectations if inflation remains stubbornly high. The firm’s analysis includes a high case where inflation remains elevated, potentially forcing the RBA to raise interest rates more than anticipated into 2027. Conversely, their low case considers a weaker economic outcome influenced by renewed global uncertainties and a deteriorating labour market.
Lawson added, “The RBA remain highly data dependent, and the advent of Middle East tensions at month end are likely to increase policy path uncertainty. The domestic economy shows signs of general resilience, but the global backdrop has the potential for disruption.” Currently, Janus Henderson holds no tilt, carefully monitoring incoming economic data and global events to inform their investment strategies.
