April 2023
Tomasz Woźniak 
The end-of-April forecasting for the RBA cash rate survey by finder.com.au follows the anouncement of inflation for the first quarter of 2023 at the level of 7%. It fell, but remains high. The new data leads to forecasts indicating a slight increase in the cash rate for May. In the longer horizon, the bond yield curve modelling indicates stabilisation or further increases of cash rate while a system focusing on inflation and its expectations show its decline.
Cash rate forecasts
The figure below presents the monthly cash rate series starting from January 2010, with the forecasts reported from May 2023 to April 2024 as the forecast mean and the 68% forecasting intervals.
The table below makes the numerical values presented in the figure more accessible.
| monthly | lower | upper | |
|---|---|---|---|
| May 2023 | 3.53 | 3.41 | 3.65 |
| Jun 2023 | 3.52 | 3.34 | 3.70 |
| Jul 2023 | 3.53 | 3.28 | 3.79 |
| Aug 2023 | 3.58 | 3.25 | 3.91 |
| Sep 2023 | 3.63 | 3.22 | 4.04 |
| Oct 2023 | 3.66 | 3.16 | 4.17 |
| Nov 2023 | 3.71 | 3.13 | 4.28 |
| Dec 2023 | 3.78 | 3.13 | 4.43 |
| Jan 2024 | 3.87 | 3.14 | 4.59 |
| Feb 2024 | 4.01 | 3.22 | 4.79 |
| Mar 2024 | 4.10 | 3.25 | 4.94 |
| Apr 2024 | 4.16 | 3.25 | 5.06 |
Survey answers
Based on the forecasts above, and the analysis of forecasts from individual models, I formed the following survey answers:
When you think the RBA will change the cash rate?
| May 2023 | Jun 2023 | Jul 2023 | Aug 2023 | Sep 2023 | Oct 2023 | Nov 2023 | Dec 2023 | Jan 2024 or later | |
|---|---|---|---|---|---|---|---|---|---|
| Increase | ✓ | ✓ | |||||||
| Decrease |
Why do you think this?
The new reading of the CPI inflation reaching 7% in the first quarter of 2023 aligns the quarterly forecasts with the monthly indicating the cash rate at 3.77% within the next 3-5 months. The prediction bands around this value reach from 3.4 to 4.1 %. My interpretation is a likely raise by 15 pp this or next month. Beyond this horizon, the forecasts diverge with the bond yield curve modelling indicating further increases and the system focusing on inflation, labour market and expectations showing cuts. The arrival of new macro data occurs essential in such dynamically changing circumstances./
By how much do you think the RBA will change the cash rate in the next meeting?
15 pbs
At what level do you think the cash rate will peak?
3.8%
When do you think the cash rate will peak?
June 2023
Where do you think the cash rate will be at the end of 2023?
3.8%
RBA’s decision
On 2 May 2023, the RBA announced an increase in the cash rate target by 25 basis points.
Forecasting system
My monthly forecasts were based a similar forecasting system as the one I developed for March forecasts. However, due to unavailability of long-term interest rates via package readrba I only used cash rate and government bond yields at maturity 30, 90, and 180 days. The data is plotted below.
