Bond investors have modestly pared back expectations on how high the RBA will bring the cash rate and anticipate a 0.5 per cent increase on Tuesday.
Bond markets have modestly pared back expectations on how high the Reserve Bank will increase the cash rate and the Australian dollar has been knocked lower as Europe’s energy crisis encourages investors to stick with safer currencies.
Commonwealth Bank forecasts the RBA will pause its tightening for “at least a few months” when the cash rate hits 2.6 per cent or 2.85 per cent.“The data will indicate that there is no need to continue to take the policy rate higher,” said Gareth Aird, head of Australian economics at CBA. “Taking the cash rate higher would likely generate a hard landing in the economy.”
China is Australia’s key export market and a sharp slowdown in its economy is expected to influence demand for commodities, particularly iron ore. ANZ has downgraded China’s 2022 growth to 3 per cent. “Recent economic data have reinforced the resiliency of the US economy, and policymakers are still not convinced that it would be appropriate to slow the pace of rate hikes,” it said in a note.
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