RBA interest rate forecast: Economists expect 0.5% hike in September

Australians are expected to suffer more from the hip pocket on Tuesday, with the Reserve Bank (RBA) widely expected to raise interest rates by another 50 basis points.

For the past four consecutive months, Australia’s central bank has hiked the interest rate after a record low

Four of these increases, in June, July and August, were 50 basis points.

If the RBA passes another 0.5% hike for September – as most economists predict – it means Australia will be caught in the throes of its fastest tightening cycle in more than two decades.

The RBA cut the cash rate to 0.1% at the end of 2020 amid the Covid-19 pandemic – the lowest it has ever been – and throughout the pandemic has said it did not expect to raise cash rates until 2024.

However, with inflation and the cost of living on the rise, they hit mortgage holders with several rate hikes. Australia’s cash rate currently sits at 1.85%, up considerably

Ahead of Tuesday afternoon’s announcement, AMP chief economist Shane Oliver told news.com.au that a 50 basis point increase was “the most likely scenario”.

“They’ve done five straight hikes, four straight 0.5% hikes, it’s the fastest tightening cycle since 1994,” he said.

Deliver more live and on-demand financial news with Flash. More than 25 news channels in one place. New to Flash? Try 1 month free. Offer ends October 31, 2022 >

Mr Oliver said that although 0.5% was likely to occur on Tuesday, some more conservative estimates put the figure somewhat lower, which would bring welcome relief to millions of Australians.

“It’s possible they’ll slow the pace, make a 0.25 or 0.4% increase,” he said.

“0.4% could bring the cash rate back to a more normal level.”

However, he added: “The most likely scenario is that they stick to 0.5% (up).

“Inflation numbers are still on the rise.”

Australians with a $500,000 mortgage are paying an average of $475 more per month than when interest rates were at record lows.

It comes as Australia’s cost of living crisis deepens, leaving borrowers even more cash-strapped than usual.

Last quarter, transportation costs rose 13.1% as fuel prices hit record highs for the fourth consecutive quarter.

Meanwhile, the grocery store is also causing hip pocket pain, with Australians outraged to find heads of lettuce being sold for $10 a soft drink and peppers marked for $15 a kilo.

Mr Oliver said that despite the cost of living crisis, economic data had not yet weakened, leaving the RBA no choice but to continue trying to curb inflation with interest rate hikes. ‘interest.

“Economic data on retail trade and employment remained quite strong,” he said.

He also pointed out that there was usually a lag of several months between economic data and interest rates.

Mr Oliver predicted that the cash rate would peak at 2.6% by the end of the year.

By next year, he thinks there will be several rate cuts once inflation is brought under control.

However, he warned that others believed the peak would be 3.6% at the end of 2023.

Interest rates in Australia peaked at 17.5% in January 1990. Since then they have averaged 3.93%.

Prior to this year, the last time the RBA raised rates was in 2010. It has only been falling since then.

Read related topics:reserve bench

Source link