Australian households brace for possible rate rise on Melbourne Cup day
Economists expect the Reserve Bank of Australia to consider a November rate hike after upcoming inflation data could exceed the bank’s forecasts.
Australia’s central bank is set to receive a fresh trimmed-mean inflation reading on Wednesday, which many expect to top the 0.8% forecast and reach about 1.0%. Betashares chief economist David Bassanese argues that this would satisfy deputy governor Andrew Hauser’s definition of a materially worse outcome, likely prompting a November rate increase despite a pre-emptive hike in September. The market’s odds of a hike have risen from 27% to over 60% for the Melbourne Cup day decision.
RBA chief economist Sarah Hunter emphasized the difficulty of higher rates for households but stressed their effectiveness in lowering inflation. EQ economics managing director Warren Hogan described the upcoming move as inevitable, though he left open the possibility of further hikes later in the year.
Why it matters
A rate rise would raise borrowing costs for Australian households and could slow economic activity.
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