Cash Rate Predictions

With the RBA Board meeting next Tuesday, the market yields are implying an increase of 50bp (to 2.35%) as ~70% likely.

My guess is we'll get a 50bp increase on Tuesday, especially given the strong core inflation seen in the monthly CPI numbers released yesterday. The recovery of the AUD over the last few days means a larger increase probably isn't warranted at this point.

The market is also anticipating rates to peak at 4.14% mid-next year. This is well above economists expectations and feels a bit high to me as well given current conditions. However, as we've seen over the last week in the UK, conditions can change very quickly so the value of longer term forecasts is pretty limited.