RBA to hike rates in November 2022, well ahead of the 2024 timeline – CBA

The Reserve Bank of Australia (RBA) is expected to begin a rate lift-off as early as November 2022 when compared to the previous forecast of the 2024 rate hike, Commonwealth Bank of Australia (CBA) economists said in their latest note.

Key quotes

“The Australian labour market has tightened at a phenomenal pace and underutilisation in May was at its lowest since early 2013.”

“The forward-looking indicators of labour demand are very strong yet labour supply is constrained, which means the labour market will continue to tighten very quickly and wages growth will accelerate.”

“For the past six months CBA’s economic forecasts for the Australian economy have been at odds with the RBA’s “2024 at the earliest” forward guidance on the cash rate given the strength of the economic data.” 

“There are scenarios that could see the RBA pull the rate-hike trigger earlier than November 2022, particularly if they tweak their reaction function because it becomes irrefutable that wages growth is on a path to 3 per cent per annum - the rate of growth they have targeted.”

Market reaction

The aussie is little impressed by the RBA rate hike expectations, trading on the back foot against the US dollar.

At the time of writing, AUD/USD drops 0.10% on the day to trade at 0.7546.