Major bank says another rate hike coming in matter of weeks
The signs are mounting that a fourth interest rate hike could be handed down at the end of the month, bringing the cash rate up to a 15-year high.
While economists are split on the exact timing of the Reserve Bank’s next move, there is growing consensus it will need to raise rates before the end of the year to clamp down on rising inflation.
Millions of Australians could be hit by higher interest rates in the coming months. Edwina Pickles
On Wednesday, Macquarie Bank became the latest major financial institution to forecast a hike when the RBA’s monetary policy board meets next on September 28-29.
“With unemployment still around three quarters of a percentage point below the pre-COVID level, the RBA now seems to feel that output remains above the economy's potential, suggesting that more needs to be done to bring inflation back to target,” chief economist Ric Deverell said.
That forecast followed comments from two of the RBA’s most senior officials indicating a hike is firmly on the table.
Assistant governor Sarah Hunter said on Tuesday that “the board may well have to raise interest rates to tackle [high inflation]”.
Later that day, deputy governor Andrew Hauser struck a similar tone, not going as far to confirm another hike, but saying it’s under consideration even as the RBA tries to keep unemployment near record lows.
“We are very, very clear we have to hit that two to three per cent [inflation] range, aiming at the midpoint,” he told the ABC’s 7.30.
“We are doing it, as you say, over a longer period than some other central banks have done.
“And we're doing it in order to try to protect the jobs gains that happened during COVID.
“If at some point it becomes clear that that is not a feasible path, we'll take another path.”
Headline inflation slowed marginally to 3.5 per cent in July, but it was nothing to celebrate; the figure remains well outside the RBA’s 2-3 per cent target, and was higher than expected, therefore increasing pressure on the bank to hike rates again.
The trimmed mean – the RBA’s preferred measure of core or underlying inflation – remained steady at 3.6 per cent, also higher than forecasts.
Hauser said it was clear Australians are fed up with skyrocketing prices, and added his bank needed to better explain its decisions to the public.
“People are furious about inflation,” he told 7.30.
“I understand why. It's unfair. It hits people on low incomes. It damages price signals. It makes the job of companies difficult.
“What they want us to do is our job and bring inflation down. And I understand that and I support that… it's the most profound message that we get.
“Everywhere I go, I hear cost, cost, cost, inflation, inflation, inflation.
“And that's our responsibility. We have to put that right.
“And yes, we have to explain ourselves. Yes, we should communicate better.”
The RBA will hand down its next rates decision on September 29. AFR
Major banks all predicting another hike
Macquarie’s prediction of a September rate hike makes it the latest major lender to forecast more pain on the way for the millions of households with a mortgage.
NAB has also pencilled in a hike on September 29, while the rest of the big four are tipping a November move from the RBA.
Westpac was the last of the big four to update its forecast, announcing on Tuesday that a Melbourne Cup day hike is now the most likely scenario.
“Tactically, we believe RBA leadership would strongly favour a November hike over September,” chief economist Luci Ellis said, but added a move in September remains possible.
If the RBA does increase the cash rate target by 25 basis points, it would bring rates up to 4.6 per cent – the highest level since November 2011.
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