Economists at ANZ Bank had expected the Reserve Bank of Australia (RBA) to tighten by 50 bps in October. They now have the RBA cash rate target peaking at 3.6% in May 2023, up 25 bps from previous peak of 3.35%.

Peak in the RBA’s tightening cycle lifted

“We see the RBA’s decision to slow the pace of rate hikes as extending the duration of the cycle. The slower pace of rate hikes increases the risk that rates need to go higher than previously expected, as demand remains too strong and sentiment is initially boosted by the RBA’s moderation.”

“Our revised rate path has the RBA tightening by 25 bps in November, then pausing until successive 25 bps increases in February and March. From there we think evidence of further acceleration in wages growth will push the RBA to tighten by a final 25 bps in May to 3.6%.”