Australian homeowners will be hit by a THIRD sharp interest rate hike in as many months as bankers scramble to rein in inflation
- The Reserve Bank of Australia will meet on Tuesday and is expected to raise its exchange rate
- At last month’s meeting, the RBA raised the interest rate by 50 basis points
- The 0.35 to 0.85% increase added hundreds of dollars to mortgage bills
- Another 50 basis point hike is forecast by some economists to fight inflation
There is little doubt that the Reserve Bank of Australia will raise the key rate again at its board meeting on Tuesday, the third consecutive monthly hike.
If economists are right, borrowers will be eyeing another 50 basis point hike as the RBA tries to rein in inflation as it climbs to 7% this year from an already high 5.1%.
In recent public appearances, RBA Governor Philip Lowe has made it clear that his board will do whatever is necessary to bring inflation back to the 2-3% target.
However, he appeared to rule out taking the lead from the US Federal Reserve, which last month raised its key rate by 75 basis points, the biggest move in nearly 30 years.
Mortgage bills are set to rise further this month as the RBA meets on Tuesday where it is expected to raise the interest rate by up to 50 basis points (stock image)
Mr Lowe told a conference that he expects the RBA board to have the same discussion as in June, when the option of 25 or 50 basis point increases was on the table.
Economists expect the cash rate to continue to climb in the coming months, reaching around 2% by the end of the year from 0.85% currently.
“The RBA wants to quickly raise rates to more ‘normal’ levels to slow the economy and stem inflationary pressures,” said Craig James, chief economist at Commonwealth Securities.
On the economic data front, further figures to be released next week will show how the economy has been hit by Australia’s first interest rate hikes in over a decade.
However, figures so far suggest the first increase, in May, has had little impact.
The central bank is trying to curb inflation which is soaring towards 7% (file image)
The week starts Monday with construction approvals and loan figures from the Australian Bureau of Statistics.
RBA figures released on Thursday showed credit demand in May remained relatively flat, with annual growth of 9%, the highest since October 2008.
The ABS will also release international trade and payrolls data for the fortnight to June 11 on Thursday, a precursor to a full labor force report due July 14.
Elsewhere, the weekly ANZ-Roy Morgan Consumer Confidence Index is due Tuesday.
Confidence has slowly risen over the past two weeks after falling nearly 8% to its lowest level since April 2020 following the last interest rate hike.
However, the level of confidence indicates that the pessimists still far outweigh the optimists.
Despite such gloom, last week’s figures showed retail spending hit a record high in May.
RBA boss Philip Lowe (pictured) said another hike similar to last month’s will be discussed at Tuesday’s meeting
Meanwhile, Australian stocks are set to rise on Monday after global indices rallied on Friday ahead of the July 4 US long weekend.
The Dow Jones Industrial Average rose 321.83 points, or 1.05%, to 31,097.26, the S&P 500 gained 39.95 points, or 1.06%, to 3,825.33 and the index Nasdaq Composite added 99.11 points, or 0.9%, to 11,127.85.
Australian futures rose 96 points, or 1.48%, to 6,545.
The benchmark S&P/ASX200 index ended Friday down 28.2 points, or 0.43%, at 6539.9 after losses in the mining and energy sectors.