Boom or Bust? Bank Analysts Predict Possible Shifts in Australian Rates

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As the Reserve Bank of Australia (RBA) utilises economic health as its guide for rate hikes, domestic banks’ analysts revealed that stringent regulation shields the Australian banking sector from potential collapse in Silicon Valley’s SVB (SIVB.O).

As inflationary pressures remain palpable in the face of favourable business conditions and robust employment data coming later this week, domestic matters will take centre stage for the Reserve Bank of Australia’s meeting on April 4. They’ll continue to evaluate SVB’s collapse-related repercussions as well.

Analysts from three of the four leading lenders – Commonwealth Bank of Australia (CBA.AX), National Australia Bank (NAB.AX), and ANZ Group Holdings (ANZ.AX) – are anticipating that RBA will continue their streak with an eleventh rate rise next month.

Despite no visible improvement, the Reserve Bank of Australia (RBA) is expecting further tightening in their economic policy,” ANZ Research’s Senior Economist, Adelaide Timbrell, asserted.

The analysts at the top three banks predict a 0.25% rise in April, pushing the cash rate to 3.85%. Two of these institutions have further predicted this will reach its highest point of 4.10% by May.

Since last May, the RBA and U.S. Federal Reserve have increased their interest rates by 350 bps in one of the most aggressive policy-tightening cycles in decades. 

Recent events indicate a possibility that global central banks may halt their rate hikes sooner than expected, as investors believe the Fed will be hesitant to raise rates next week.

We are kind of watching this from a distance and benefiting from that distance,” said Rodrigo Catril, senior FX strategist at NAB.

Australian banks are undeniably among the most well-capitalised in the world and boast “unquestionably strong” capital frameworks, excellent governance, resilience to rising interest rates, and stricter lending standards. Various regulatory structures guarantee this security for all citizens.

Even after the U.S. government assured them, banking stocks were still affected by SVB’s collapse worldwide, causing a review of interest rate predictions. 

CBA Chief Economist Stephen Halmarick predicts there will be quarter-point hikes in March and May from the Fed since inflation rates remain too high for them to ignore.

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