The Reserve Bank of Australia (RBA) will make its next interest rate decision on Tuesday, one sure to impact market activity and have mortgage holders, those with capital and retirees watching closely.
The raising of a national interest rate is our – and all central banks’ – main weapon in bringing down inflation. If loans are harder for businesses to get, there’ll be less development, fewer jobs, and less spending in the overall economy.
The last time the RBA raised rates, it pushed the national cash rate to 4.1 per cent on the back of a 25bps raise. That was just last month and that decision marked the highest cash rate in Australia in 12 years.
Tight labour markets, resilient consumers, high house prices, new government legislation raising superannuation and wages and sticky services inflation remain a challenge and property prices at levels unsustainable for many owners and renters, there’s no insignificant chance the RBA will raise again on Tuesday.
Should the bank raise its central rate, it will be the 13th rise in more or less as many months.
Here are some expert predictions ahead of tomorrow’s decision:
Morgan Stanley
Analysts for investment bank Morgan Stanley expect the RBA to raise the rates by another 25bps.
Morgan Stanley views core inflation as still too sticky in Australia; with a particular view towards housing and electricity inflation. Its analysts also note a general hawkish trend from other world governments’ central banks in recent weeks.
Its stance: Most other DM (developed markets) central banks have shifted more hawkish through the month, pointing to sticky services inflation.
Analysts also noted ongoing high labour costs in Australia.
National Australia Bank
NAB is also expecting a 25bps hike on Tuesday, with analysts suggesting there’s “no value in delay”.
NAB analysts see a terminal rate of 4.6 per cent with one more raise in July and then another in August – echoing the predictions of the US Federal Reserve Chief Powell’s expectations for two further hikes.
CommBank
CommBank expects to see at least one more rate hike but remains undecided on whether or not July 4 will be the date the RBA makes its next increase.
CommBank analysts see a “risk” of a 4.6 per cent peak – the very same outcome NAB analysts are expecting.