Australian homeowners to be hit with a THIRD big interest rate rise in as many months as bankers scramble to put the brakes on inflation
- Reserve Bank of Australia to meet on Tuesday and is expected to raise cash rate
- At last month’s meeting, the RBA hiked the interest rate by 50 basis points
- The 0.35 to 0.85 per cent raise added up to hundreds of dollars to mortgage bills
- Another 50 basis point lift is forecast by some economists to tackle inflation
There appears little doubt that the Reserve Bank of Australia will lift the cash rate again when its board meets on Tuesday, the third monthly hike in a row.
If economists are correct, borrowers will be looking at another 50 basis point increase as the RBA tries to rein inflation as it balloons towards seven per cent this year from an already lofty 5.1 per cent.
In his recent public appearances, RBA governor Philip Lowe has made it clear that his board will do all that is necessary to bring inflation back to the two to three per cent target.
However, he appeared to rule out taking a lead from the US Federal Reserve, which last month jacked up its key rate by 75 basis points, the biggest move in nearly 30 years.
Mortgage bills are set to rise again this month as the RBA meets on Tuesday where it is expected to lift the interest rate as much as 50 basis points (stock image)
Mr Lowe told a conference that he expects the RBA board will have the same discussion as it did in June, when the option of 25 or 50 basis point increases were on the table.
Economists expect the cash rate will continue to climb in the coming months, reaching around two per cent by the end of the year compared with 0.85 per cent at present.
‘The RBA wants to quickly lift rates to more ‘normal’ levels to slow the economy and stem inflationary pressures,’ Commonwealth Securities chief economist Craig James said.
On the economic data front, further figures to be released in the next week will show how the economy was impacted by Australia’s first interest rate hikes in over a decade.
However, figures so far suggest the first increase, in May, had little impact.
The central bank is trying to curb inflation which is soaring towards seven per cent (file image)
The week kicks off with building approvals and lending figures on Monday from the Australian Bureau of Statistics.
RBA figures released on Thursday showed that demand for credit in May held relatively steady, with annual growth at nine per cent – its highest since October 2008.
The ABS will also release international trade data on Thursday and payroll data for the fortnight to June 11, a precursor to a full labour force report due on July 14.
Separately, the weekly ANZ-Roy Morgan consumer confidence index is due on Tuesday.
Confidence has been slowly grinding higher over the past couple of weeks after slumping nearly eight per cent to its lowest level since April 2020 after the last interest rate hike.
However, the level of confidence indicates that pessimists still far outweigh optimists.
Despite such gloom, figures last week showed retail spending hit a record high in May.
RBA boss Philip Lowe (pictured) said another rise similar to last month’s will be discussed at the meeting on Tuesday
Meanwhile, Australian shares are poised to rise on Monday after global indexes lifted on Friday ahead of the US Fourth of July long weekend.
The Dow Jones Industrial Average rose 321.83 points, or 1.05 per cent, to 31,097.26, the S&P 500 gained 39.95 points, or 1.06 per cent, to 3,825.33 and the Nasdaq Composite index added 99.11 points, or 0.9 per cent, to 11,127.85.
Australian futures were up 96 points, or 1.48 per cent, to 6545.
The benchmark S&P/ASX200 index finished Friday down 28.2 points, or 0.43 per cent, to 6539.9 after losses in the mining and energy sectors.