(Bloomberg) -- Westpac Banking Corp. chief economist Bill Evans expects Australia’s central bank will begin its interest rate tightening cycle in August with a 15 basis point hike as strong jobs growth is seen driving faster inflation.
The Reserve Bank of Australia will follow that up with another 25 basis points increase in October, Evans said in a research note Thursday. He had previously seen the RBA’s first hike in February next year.
The prediction contrasts with signals from Governor Philip Lowe who has repeatedly said the probability of a rate rise in 2022 was close to zero, citing the bank’s forecasts which point to subdued wages and inflation pressure until late-2023.
“We expect that underlying inflation (trimmed mean) will reach 2.4% in 2021 and lift to 2.6% in March 2022 and 2.9% in June 2022,” Evans said. “This will mean that by the time of the August meeting the board will have observed three consecutive quarters in which annual underlying inflation has achieved or exceeded its target (around the mid-point of the 2-3% range).”
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