HSBC Foresees RBA Cash Rate at 6.25% by Q1 2007

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By Rudi Filapek-Vandyck

Interest rates in Australia are going up sooner rather than later we wrote this week. It would seem that HSBC’s senior economist John Edwards is now firmly on par with that view as well.

In his latest update on the Australian economic outlook, Edwards now says that an interest rate hike (by 25 basis points) in July should now be regarded a possibility. Edwards holds the view that it won’t be later than August before the Reserve Bank of Australia (RBA) makes its next move.

And it won’t be the last one still, as he now thinks official interest rates will move beyond what is widely regarded neutral territory, forecasting another rate hike before the end of the first quarter next year.

His predicting for the interest rate cycle is thus that the RBA will take up the official cash rate to 6.25%.

According to Edwards this “would be designed to more tellingly constrain demand to the RBA’s view that the trend growth of output is henceforward in the twos and threes rather than the threes and fours”

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