How high will the RBA hike rates in June: here's what the big four banks think

Many economists are tipping that back-to-back rate hikes may be the results of the Reserve Bank of Australia’s (RBA’s) upcoming June 2022 meeting. But how high is the cash rate likely to rise this month? Here’s what the  big four banks think. 

ANZ – 40 basis points 

Economists from ANZ are tipping a higher than average rate hike in June 2022 of 40 basis points. This would bring the cash rate from 0.35 per cent to 0.75 per cent.

As quoted by the Australian Financial Review (AFR), ANZ senior economist said that this higher cash rate rise could be the result of strong average earnings over the March 2022 quarter: 

“Strongly rising wages in a capacity-constrained economy will be cause for concern for the RBA, keeping speculation of a 40 basis point move at the June meeting very much alive.”

CBA – 25 basis points

The Commonwealth Bank is putting its (proverbial) money behind a 25 basis point cash rate hike (which would bring the cash rate to 0.60 per cent), but acknowledges that a 40 basis point increase could be possible.

A recent CommBank Research update gave a 75 per cent probability of a 25 basis point hike, and a 25 per cent chance of a 40 basis point hike, with the chances of other results (e.g. no hike or an even higher hike) being negligible.

According to CBA, relatively low wage growth means the RBA doesn’t need to aggressively hike the cash rate. Plus, a large hike could risk sending a message that the recent change in Federal Government has somehow changed the nation’s inflation outlook.

However, a 40 basis point hike could accelerate the RBA’s timeline of normalising the cash rate, plus hiking to 0.75 per cent would return the cash rate to a “conventional metric”, where future rises can be more conveniently calculated as quarters of a percentage point.

NAB – 25 basis points

Recent research from NAB indicates that a 25 basis point hike to 0.60 per cent is the most likely scenario.

According to NAB, the RBA minutes from May set up a string of “business as usual” 25 point rate rises, and there has been no new data since then that is likely to change these plans.

That said, NAB acknowledges the risk of a higher rate hike, with central banks in the USA, New Zealand and Canada all making recent 50 basis point rate rises.

Westpac – 40 basis points

Westpac is also backing a 40 basis point cash rate hike, describing such a hike as the “right decision.”

According to Westpac chief economist, Bill Evans, a 40-point hike would fully unwind the emergency cash rate cuts that took place at the height of the COVID-19 pandemic, stating that “clearly that emergency has passed and there is no justification to maintain an extreme emergency policy stance.”

“Although the Board meets more frequently than other central banks, the need for a decisive move when rates are extremely stimulatory and the clear need to manage inflationary expectations makes a strong case for a 40 basis point decision. Taking back the emergency cuts in 2020 would be a very important symbol of the Bank’s clear intentions to address the inflation challenge.”

Could the RBA hike even higher?

AMP chief economist Shane Oliver said there was a chance of the RBA hiking the cash rate by 50 basis points to 0.85 per cent. Westpac’s Bill Evans also said that this was a risk, though a 40-point hike was more likely due to a hike of this size having been previously considered in the past month’s RBA minutes.

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