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According to Peter Munckton, the Chief Economist at the Bank of Queensland, all three AI models—CoPilot, Perplexity, and Google’s Gemini—anticipate further increases in cash rates by 2026.
When it comes to the likelihood of a rate hike this week, two of the AI models expressed a 70 percent probability. However, one model offered a more cautious forecast.
Munckton elaborated, “CoPilot assessed the chances of a rate increase at the March meeting at 30 percent, while the other two models suggested a 70 percent likelihood.”
“I find myself aligning with the majority view and predict a rate hike during the March meeting,” he confirmed.
The AI models’ forecasts are consistent with the expectations of Australia’s four major banks.
CBA, ANZ Westpac and NAB have all shifted their cash rate predictions due to inflation running too hot, a stretched labour market, and the war in the Middle East – which is likely to add to inflation.
All four big banks now anticipate the Reserve Bank will increase the cash rate 25 basis points when it meets tomorrow and by the same margin at the following meeting in May.
Munckton however said there was an argument for the RBA exercising caution and waiting until the May meeting to understand the impact of the conflict in the Middle East.
“But unless there is a substantial jump in financial market volatility leading into the meeting the RBA appears comfortable prioritising inflation risks,” he said
“If higher oil prices does lead to some weakening of the economy that could be seen to be doing some of the work of interest rates in returning inflation to target.
“This is ultimately a judgement call and it would not be surprising if there is a split decision at the March Board meeting.”
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