Wednesday 2 November 2022 03:04 AM ANZ and Westpac forecast 3.85 per cent cash rate hike trends now
ANZ and Westpac are predicting interest rates will jump by a whole percentage point over the next six to seven months - with the Reserve Bank forecast to increase rates by 0.25 per cent on four occasions.
Those hikes would cost Australian borrowers with an average $600,000 mortgage another $372 a month in repayments - and all of it on top of a record seven rate rises and inflation hitting a new, 32-year high.
It comes as the Reserve Bank on Tuesday hiked rates by 0.25 percentage points - taking the cash rate to a new nine-year high of 2.85 per cent.
In recent forecasts, ANZ and Westpac both predict the cash rate will hit an 11-year high of 3.85 per cent by May 2023.
Westpac chief economist Bill Evans is predicting 0.25 percentage point RBA rate rises in December, February, March and May.
Australian borrowers with an average mortgage could be paying another $372 in monthly repayments in 2023 as inflation hit a new 32-year high (pictured is an auction at Glen Iris in Melbourne)
Reserve Bank Governor Philip Lowe is now expecting inflation to hit a new 32-year high of 8 per cent this year, up from a previous forecast of 7.75 per cent.
Dr Lowe is also forecasting inflation will remain above the RBA's 2 to 3 per cent target into 2024 - which is the reason behind the further rate hikes.
'At our meeting today we discussed the damage that high inflation does to people; it is a scourge,' Dr Lowe told a Hobart dinner on Tuesday night.
'High inflation devalues your savings. It worsens inequality in our society and it undermines our living standards.
'It hurts us all by impairing the functioning of our economy.
'It is for these reasons that the Reserve Bank board will make sure that this episode of high inflation is only temporary.'
Should ANZ and Westpac's predictions of a 3.85 per cent cash rate come true, the average borrower would have seen their repayment surge by $1,211 in a year - or 53 per cent.
Westpac was last week expecting a 3.85 per cent RBA cash rate by March 2023 but chief economist Bill Evans on Tuesday afternoon amended those predictions to have the terminal cash rate being reached by May next year (pictured is a Sydney bank branch)
Westpac was last week expecting a 3.85 per cent RBA cash rate by March 2023 but chief economist Bill Evans on Tuesday afternoon amended those predictions - now forecasting the cash rate will reach the point by next May.
'Given that the board chose not to respond to the inflation shock with more than 25 basis points we can only conclude that as rates continue to rise the increments will be 25 basis points,' he said.
ANZ's head of Australian economics David Plank is also predicting a 3.85 per cent cash rate by May 2023, based on the idea the RBA will stick with 0.25 percentage point increases unless higher wages fuel more inflation.
'It will be very difficult for the RBA to return to 50 basis point rate hikes unless clear evidence of a price-wage spiral emerges,' he said.
The futures market is expecting the RBA cash rate to hit 3.85 per cent by July 2023.
Gareth Aird, the Commonwealth Bank head of Australian
