Commonwealth Bank is sticking to its contrarian call that the Reserve Bank will slow the pace of interest rate increases next week, making it the only big four bank forecaster to predict a 0.25 percentage point rate rise for October.A new monthly inflation indicator showed a softer increase in price pressures, said Gareth Aird, head of Australian economics at CBA, slowing“We believe behind closed doors the RBA will welcome the data,” he said.
The Reserve Bank holds its policy meeting on Tuesday and bond markets as well as the majority of economists tip the cash rate will be raised by 0.5 percentage points to 2.85 per cent, the highest in nine years. “We stick with our call for the RBA to slow the pace of their tightening cycle at next week’s board meeting and to raise the cash rate by a ‘business as usual’ 25 basis points,” said Mr Aird.He pushed back against the dominant view that the drastic fall in the Australian dollar is adding to inflationary pressures. “The Australian dollar has held up on a trade-weighted index basis and imported inflation is more closely correlated with the TWI than the $A,” Mr Aird said.
The Australian dollar dropped 1 per cent lower to US64.56¢, having hit a fresh 2½ year low of US63.61¢ on Wednesday. It has shed more than US5¢ in less than two weeks, putting it on track for a monthly loss of 5.6 per cent. Interbank futures are fully priced for a 0.25 percentage point lift by the RBA next week and imply a 62 per cent chance of a fifth consecutive 0.5 percentage point move.is a markets reporter based in the Sydney newsroom.
They must follow the Kouk
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