Hike rates

Interest rates: the Reserve Bank will continue to raise rates until 2023

Australian homeowners can expect rates to rise again when the Reserve Bank meets next month.

Economists now predict rates will rise another 0.50 percentage points in October.

The central bank raised its key rate by 50 basis points to 2.35% at the start of the month, the fifth hike in as many months.

However, the minutes of the Reserve Bank of Australia’s September meeting featured a debate over whether to raise the rate by just 0.25% – a discussion that had not been discussed. place in August.

“They recognized that monetary policy was operating with a lag and that interest rates had risen quite rapidly and were approaching normal parameters.”

But the importance of getting inflation back on target and the “potential damage” of persistent inflation, coupled with a relatively low cash rate, led to the 0.50% rise.

Board members nevertheless reiterated that the central bank was not on a predefined path and would be balanced to “keep the economy in balance”.

Westpac chief economist Bill Evans said he now expects another 0.5% rise in October.

But he expects the central bank to slow hikes by a quarter point in November, December and February, when rates will peak at 3.6%.

“Clear evidence of the expected slowdown in inflation will not be apparent until late February, allowing the RBA to suspend in March on evidence that growth is slowing and inflation and rates have also peaked in the United States. “, did he declare.

David Plank, head of ANZ Economics, noted that it would be bad optics for the RBA to issue a lower rate hike next month if the inflation rate, which will be updated at the end of October, beat expectations.

“We believe that kind of ‘backflip’ would damage the credibility of the RBA,” he said.

“Inflation, wage growth, the labor market and/or inflation expectations will be key to whether the tightening resumes in February.”

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