Will the RBA hike the cash rate today?

The RBA is scheduled to announce its Cash Rate Target today at 2:30pm AEST. Here's what the experts are predicting.

The official Cash Rate has held steady at 0.10% since November 2020. However inflation data released last week led to revised predictions as to which way the RBA will go at its monetary policy meeting today.

AMP Capital chief economist Shane Oliver now expects the RBA to start hiking today by 40 basis points, which will take the cash rate to 0.50%.

"We expect the RBA to hike rates on Tuesday and to do so by 0.4%.

"It’s a close call as to whether the first hike is 0.15% (taking the cash rate to 0.25%) or 0.4% (taking it to 0.5%) as the RBA may prefer a cautious approach initially and to not upset the Government too much given the election.

"We are concerned that a 0.15% hike won’t send a particularly strong signal in terms of its resolve to keep inflation expectations down and so we lean to a 0.4% move on Tuesday.

"We expect another 0.25% hike in June and now see the cash rate rising to 1.50% by year end.

"It may annoy the Government as we are in the midst of an election campaign ... [but] the RBA will now look more political not to go in May given the surge in inflation."

Also read: What happened the last time the RBA hiked the Cash Rate?

ANZ economists are also tipping a rate hike today, of 15 basis points.

"We now expect the RBA to hike by 15bp next week," ANZ economists said.

"Inflation pressures have momentum and have broadened. A cash rate target of 0.1% is inappropriate against this backdrop.

"We don’t think the RBA needs to wait for more data on wages, given that its own liaison program indicates that wages growth had continued to pick up in the March quarter.

"The move in May will likely be followed by an increase of 0.25% in June, taking the cash rate to 0.5%."

Westpac economists echoed this prediction, anticipating a 15 basis point increase.

"The RBA now expected to commence tightening with a 15bp increase in May and a steady sequence of five 25bp moves out to December," Westpac economists said.

"These forecasts have the cash rate reaching 1.5% by end 2022 and 2% by May 2023."

CBA economists still hanging their hat on June

Commonwealth Bank economists have held their prediction for a cash rate increase, saying today's RBA decision will most likely be to keep the Cash Rate at 0.10%.

"While Commonwealth Bank (CBA) Group economists acknowledge that the RBA could increase rates, we believe that it is more likely to wait for confirmation that wages have started to lift towards the goal rate of 3%," CBA economists said.

"The other complication being the timing of the federal election on May 21.

"So we expect the RBA to lift the official cash rate at the Board meeting on June 7, following a shift to an explicit policy tightening bias at the May 3 meeting."

"Will the RBA hike the cash rate today?" was originally published on Savings.com.au and was republished with permission.