Australia to end outsized rate hikes, say economists

Bloomberg

Australia’s central bank will dial back the pace of policy tightening to quarter percentage-point moves from next month as it tries to navigate a path to cooling inflation while maintaining economic growth.
Three-quarters of economists surveyed by Bloomberg expect the cash rate will rise to 2.6% from 2.35% at the Reserve Bank’s October 4 meeting. The poll was run after Governor Philip Lowe signalled a potential end to larger hikes.
Goldman Sachs Group Inc and Australia & New Zealand Banking Group Ltd are among five that see the RBA delivering a fifth consecutive half-point hike.
Credit Suisse Group AG is alone in calling a 40-basis-point move to 2.75% that would return the rate to multiples of 25 basis points. This would remove an anomaly created during the pandemic when it was cut to a record-low 0.1%.
The RBA is among the first developed-world central banks to signal a downshift in tightening, with Lowe highlighting different labour market dynamics to the US and UK among factors that are particular to Australia.
His concern is excessive tightening to try to crush inflation when households are heavily indebted and most borrowers are on variable-rate mortgages risks sending the $1.5 trillion economy into recession.
The median estimate of economists polled by Bloomberg as well as money market pricing is for the cash rate to peak at 3.1% in December, which implies three quarter-point increases at each remaining meeting this year. Traders see the cash rate peaking at 3.6% around mid-2023.