ANZ Bank joins its peers, predicting the Reserve Bank of Australia will raise interest rates in March and May

Investing.com - ANZ Bank (ASX:ANZ) has joined the ranks of major banks, predicting the Reserve Bank of Australia will raise interest rates twice in March and May, citing persistent inflation pressures and a resilient labor market.

ANZ analysts expect the RBA to raise the cash rate by 25 basis points at the March 16-17 meeting, followed by another 25 basis point increase in May, bringing the policy rate to around 4.35%.

Get an exclusive preview of central bank decisions before they are announced on InvestingPro

Westpac analysts also forecast rate hikes in March and May.

“The most direct and clear impact of the Middle East conflict on Australia is higher inflation,” ANZ economists wrote, adding that rising energy costs will pressure household disposable income and, over time, dampen demand.

Given the relatively strong starting point of the economy, inflation remains a primary concern for the RBA. ANZ pointed out that Australia’s GDP grew 2.6% year-over-year in Q4 2024, which the central bank considers above its potential growth rate.

Analysts also noted recent consumer price data showing signs of demand-driven inflation and a tight labor market, which could prompt policymakers to act swiftly to contain inflation expectations.

Australia’s status as a net energy exporter may partially offset the impact of rising global prices, as higher liquefied natural gas prices could improve the country’s trade conditions.

Nevertheless, ANZ stated that once the cash rate reaches about 4.35%, the RBA may pause rate hikes to assess whether the current policy stance is sufficiently tight and to evaluate the impact of global geopolitical developments on the economy.

This article was translated with the assistance of AI. For more information, see our Terms of Use.