But borrowers have a long wait for RBA to cut interest rates
While Australia’s annual inflation rate showed a small increase for August, an ANZ economist says it’s unlikely to push the RBA to raise the official cash rate next Tuesday.
Australia’s inflation rate for the 12 months to August came in at 5.2%, up from July’s monthly result of 4.9%.
ANZ senior economist Adelaide Timbrell (pictured above) said while the latest monthly CPI indicator for August posed some risk to ANZ research’s forecast for Q3 inflation, “we don’t think the upward surprise was enough to convince the RBA to increase the cash rate in October”.
“However, the higher-than-expected inflation in August does add somewhat to the evidence that we are unlikely to see a cash rate decrease for some time,” Timbrell said.
ANZ, which is currently battling to buy Suncorp Bank, forecasts the first cash rate cut will occur in the last quarter of 2024.
“The RBA may be hesitant to cut rates any earlier than this since it’s unlikely that inflation won’t be comfortably back in the band until 2025,” Timbrell said.
Comparison site RateCity.com.au research director Sally Tindall said in a statement on September 27, that Australia’s battle with inflation “just hit a bump in the road, but it wasn’t an unexpected one and it’s certainly not enough for the RBA to hit the panic button”.
“Any household reliant on their car will tell you petrol prices have gone through the roof, putting a squeeze on many finely balanced budgets,” Timbrell said.
“After four percentage points of cash rate hikes already putting immense pressure on many family budgets, the RBA now has to tread extremely carefully.
“These next few meetings will be crucial in getting the balance right between taming the inflation beast and keeping the economy upright.”
Timbrell said with inflation excluding volatile items and holiday travel still tracking down, and the cash rate in restrictive territory, the RBA was unlikely to pull the trigger on a 13th hike on October 3.
“That said, anyone with a mortgage should plan for at least one more rate rise, because if inflation doesn’t behave, we could end up with another hike before Christmas.”
Tuesday will mark the first time the RBA Board has met to make a monetary policy decision on the cash rate under the leadership of new RBA governor Michele Bullock.
Bullock replaced former RBA head Philip Lowe on September 18 after his seven-year term was not renewed.
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