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Another big bank pushes back RBA interest rate cut: 'Risk of a hike'

AMP has joined ANZ in pushing back its rate cut forecast.

AMP
AMP is the latest Aussie bank to push back its rate cut forecast into 2025. (Source: AAP)

AMP has pushed back its prediction of a Reserve Bank of Australia (RBA) interest rate cut into 2025 and says there is a real risk another hike could be coming. The grim news comes after inflation surged to its highest level in six months.

Inflation rose by 4 per cent over the year to May, the Australian Bureau of Statistics revealed on Wednesday, higher than the modest 3.8 per cent expected by economists. That’s also up from 3.6 per cent recorded in April.

AMP has now joined ANZ in moving back its interest rate cut forecast to early 2025, with Commonwealth Bank (CBA), NAB and Westpac still currently pencilling one in for November this year.

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“As a result of the May inflation data the risk of another hike in August is now around 45 per cent, with June quarter inflation data due in a month key,” AMP chief economist Shane Oliver said.

“Our base case remains that rates have peaked but the risk of another hike is high and we have pushed out the first cut to February next year.”

AMP was previously forecasting the first cut to come in either November or December this year, with a 0.25 per cent cut to take the cash rate to 4.1 per cent.

Are you struggling to higher interest rates? Contact tamika.seeto@yahooinc.com

CBA economist Stephen Wu said the next August board meeting was “live” for a rate hike and noted today’s inflation figures “would test the RBA’s resolve to not tighten policy further”.

“The RBA will take stock of today’s figures with some concern, particularly as their rhetoric has noted the need to ‘remain vigilant on upside risks to inflation’,” Wu said.

“However, there is still the full June quarter CPI print to come. This remains the benchmark measure of inflation in the country.

“Between now and the August Board meeting, the RBA will also receive another read of the labour force survey and two more reads on retail spending.”

While CBA did not go so far as pushing back its rate cut expectation, it said it would “review our forecasts in detail given today's upside surprise”.

The RBA left the cash rate on hold at a 12-year high of 4.35 per cent at its June meeting last week. It's next decision will come on August 6.

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