ASX drops 1pc in broad decline; gold stocks gain

ANZ economists:

“We expect a 50 basis point rate hike from the RBA at its October meeting on Tuesday, reflecting strength in recent domestic data, including solid household spending, ongoing inflation momentum and near-record job vacancies. We also expect the RBA to ‘soften’ its message by removing the reference to “over the months ahead” in the context of further rate increases.

“The strength in the domestic economy and the persistence in global inflation pressures will likely outweigh market turmoil following the UK’s mini-budget and heightened expectations of a global recession for the RBA in October. Current events in the UK show the importance of not shocking the market at a time when the credibility of policy is exceptionally important.”

Bill Evans, chief economist, Westpac:

“The Reserve Bank Board meets next week on October 4. We expect it will decide to raise the cash rate by a further 50 basis points to 2.85 per cent. Readers will be aware that on September 19 we changed our forecast for the October meeting from a 25 basis point increase to a 50 basis point increase.

“Global interest rates have lifted significantly since the last Board meeting on September 6 and the speech to the Australian Business Economists on September 8.

“…The Governor and Deputy Governor have opined on several occasions that real neutral is at least zero and using long-run measures of inflationary expectations as a guide to the nominal component (2.5 per cent), then neutral is at least 2.5 per cent.

“Given this view and in light of the rise in global rates, it seems sensible to push the cash rate to 2.85 per cent in October, taking it comfortably above the neutral benchmark before scaling back the pace of rate increases.”

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