Westpac: Expect RBA rates to peak at 3.85%, markets should be warned

Evans, chief economist at Westpac, expects the RBA’s final interest rate to hit 3.85 per cent in May next year, as labor market data for October showed the bank still had a lot of work to do. Inflation in early 2023 will be strong enough for the RBA to continue to tighten policy.

Westpac expects the Reserve Bank of Australia to raise interest rates by 25 basis points in December, next February, March and May, bringing the rate to 3.85%, higher than the market consensus. “Faced with a development like this, the RBA will only decide to pause rate hikes on the basis of its unequivocal belief that inflation will ease significantly,” Evans said. The RBA is unlikely to opt for a “preemptive, forecast-based policy” So the market should be warned.