Both ANZ and NAB are now forecasting the Reserve Bank will turn hawkish and raise rates twice next year.
The ANZ’s change of view was driven by a more positive view on the domestic economy with both growth and inflation picking up, while it forecast the unemployment rate would fall to 5.3 per cent by the end of the year.
CBA is pencilling one rate rise in the fourth quarter next year while Westpac says the RBA will hold right through until mid-2019.
Westpac’s Chief Economist Bill Evans announced Westpac economists expect the cash rate to remain on hold at the historic low of 1.50% until mid-2019, a revised forecast from early August where they put a rate change at the second half of 2018.
Evans is not convinced the Australian economy will grow as fast as the RBA is expecting over the next few years, with its “overly optimistic” expectations for inflation and wages growth sitting outside of Westpac’s own predictions.
“The RBA expects growth in Australia to be 3.25% in 2018 and 3.5% in 2019 (above trend of 2.75%),” said Evans.
“Westpac expects a below trend pace of 2.5% in both years.”