NAB ups RBA cash rate forecast to 2% by Dec (from 1.35%)

By Sophia Rodrigues

Economists at National Australia Bank are revising up their RBA cash rate forecast following the 50bps hike on Tuesday. NAB now expects the cash rate to reach 1.6% to 1.85% in the next two months (hikes of 75bps-100bps), and for the cash rate to touch 2% by December. NAB will publish a formal profile on Wednesday.

Previously NAB's forecast was for the cash rate to reach 1.35% by December.

"Our reading of the Statement suggests the RBA is now inclined to more quickly return monetary policy to a more neutral setting, which we see as in the 2-2.5% range," NAB wrote in a note. But it also reiterated: "We continue to think that cash rate pricing near 3.2% by Christmas and 3.85% in August next year, looks excessive."