More economists predicting RBA will pause rate hikes
Turmoil in the global financial markets could turn out to have an upside for stressed Australian mortgage holders.
Following the collapse of three regional banks in the United States, a number of economists are now predicting the Reserve Bank of Australia will pause its rate hike campaign next month - although others are not so certain.
Influential Westpac chief economist Bill Evans landed in the former camp on Friday afternoon, predicting that the RBA would pause at its April 4 meeting and then raise rates one final time at its May 2 meeting.
"Positioning prior to the recent market turmoil is key here," Mr Evans wrote, noting that the RBA had already been among the more dovish central banks globally before the bank failures.
"Even if the markets settle by the time of the RBA's April board meeting, there will be sufficient uncertainty for a prudent board that was already clearly open to a pause to take that option."
St George chief economist Besa Deda and three of her colleagues agreed, writing in an analysis released Friday afternoon that "an RBA rate hike next month appears all but off the table."
It was too soon to say whether the banking issues are systemic, they wrote. The initial concerns appears idiosyncratic, related to individual issues with Silicon Valley, Signature and Silvergate banks in the United States and Credit Suisse in Switzerland.
"But confidence is the bedrock of the modern financial system ... if depositors think there's a problem: there is a problem."
The RBA will be cognisant of the 10 rate hikes it has delivered since last May, which has raised the cash rate from 0.1 per cent to 3.6 per cent, wrote Ms Deda and colleagues Jarek Kowcza, Pat Bustamante and Jameson Coombs.
But ANZ economists Adam Boyton, Felicity Emmett, Catherine Birch, Adelaide Timbrell and Madeline Dunk wrote in a report also delivered on Friday afternoon that they were still predicting 25 basis point rate hikes in both April and May.
The overseas turmoil "does not yet seem to be material in the context of the broader Australian economy yet," they wrote. "It is worth recalling the RBA did tighten in 2007 and 2008, with domestic considerations overriding market volatility, albeit from a different starting point."
They noted the two major domestic data releases from this week - a strong jobs report for February and solid business conditions reported in the NAB Business Survey - suggested the Australian economy was resilient.
Commonwealth Bank Group economists are also still predicting a 25 basis point rate hike in April, "as inflation remains still high," CommSec chief economist Craig James wrote on Thursday.
CBA economist Belinda Allen said Thursday that the meeting "remains live" and the bank would monitor the release of domestic Australian data and global developments before making a final prediction on the RBA's move for April.
HSBC Global Research chief economist Paul Bloxham on Thursday predicted a pause next month, as did JP Morgan economists Ben Jarman, Tom Kennedy and Jack Stinson, as well as AMP senior economist Diana Mousina.
But Betashares chief economist David Bassanese wrote Thursday that the strong jobs report was one strike against hopes that the RBA would pause in April.
"Domestically, two other key reports before the next policy meeting are retail trade on March 28 and the monthly consumer price index report (CPI) for February on March 29," Mr Bassanese wrote.
"If both reports remain on the strong side, it could be a case of 'three strikes and you're out' for rate pause hopes."