RBA Considers Scenarios of Consecutive Rate Hikes in March

In early February, Westpac Chief Economist Luci Ellis highlighted the possibility that the Reserve Bank of Australia (RBA) may consider implementing consecutive interest rate hikes as early as March. This assessment comes after the RBA became the first major global monetary authority to raise rates this year, a move that surprised part of the market, which had expected action only after the inflation data for the first quarter.

Westpac’s Perspective on the RBA’s Next Steps

Ellis, who previously served as Assistant Governor of the RBA, provided a nuanced analysis during a recent interview. While her baseline forecast still points to a rate increase in May, she did not rule out other possibilities. “If the data between now and the March meeting indicate a more robust inflationary push, scenarios of consecutive increases become viable,” the economist stated. This position reflects the need for flexibility amid a changing economic landscape, where the RBA Governor has already signaled clear dissatisfaction with the projected inflation trajectory.

Conditions That Could Lead to More Aggressive Decisions

The threshold for further action in March is widely considered high by market analysts but not impossible to surpass. Ellis noted that if conditions align with current expectations, the RBA could keep rates steady until May. However, the key question is whether upcoming economic data will provide sufficient reasons to consider more decisive measures. The Governor has made it clear that accelerating inflation reduction is an institutional priority, even if it requires deviations from the previously communicated path.

What the Market Is Waiting For

In this context, market observers remain attentive to the flow of economic information arriving between now and March. The May meeting, previously seen as the next key decision point, may no longer be the only moment for substantial changes. Through Ellis, Westpac signals that the RBA is prepared to consider different scenarios as new economic evidence emerges, maintaining the flexibility needed for a responsive monetary policy.