Inflation in Australia rose more than expected in the third quarter. Subsequently, economists at ANZ Bank have upgraded their RBA cash rate forecasts.

Higher inflation to extend into 2023

“We have upgraded our RBA cash rate forecasts on the back of the upside surprise in the Q3 CPI data, adding a 25 bps hike in December this year to take the peak to 3.85% in May 2023.”

“A 50 bps rise in November is possible, but we think the RBA will prefer to hike more frequently than shift back to 50 bps, given the reasoning behind the decision to go 25 bps in October.”

“We see higher inflation extending into 2023 due to both the stronger Q3 data and the upside risks ahead given continuing cost pass-through, flooding, lower AUD and evidence of persistence in inflationary pressures globally.”