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Inflation forecasts vary, but experts anticipate it will climb to its peak since 2023, with estimates hovering around 4.8 percent, significantly exceeding the Reserve Bank of Australia’s (RBA) ideal range of 2-3 percent.
Trent Saunders, a senior economist at Commonwealth Bank, noted in a recent report that “headline inflation is poised for a sharp rise in March, fueled largely by the spike in gasoline prices following the onset of the conflict in Iran.”
Saunders predicts a 1.1 percent increase for the month, which would push the annual inflation rate to approximately 4.6 percent.
“Gasoline alone is expected to contribute 0.9 percentage points to this monthly rise, with prices at the pump surging by more than 30 percent throughout the month,” he explained.
Despite the RBA having already implemented two interest rate hikes in consecutive meetings this year and amid fears of an economic slowdown, its monetary policy committee is likely to approve a third increase during their meeting next week.
While the RBA has already pulled the trigger on two hikes in as many meetings this year, and there are concerns about a slowing economy, its monetary policy board is expected to make it three from three when it meets next week.
All of the big four banks are expecting a third hike of the year next Tuesday – Westpac has even pencilled two further ones in June and August – and the market is pricing in a roughly three-quarters chance that the cash rate will be pushed back up to 4.35 per cent.
And while there is a chance tomorrow’s inflation read may dampen the case for a rate hike next week – and the roughly $91-a-month blow it would deliver average mortgage-holders – the nation’s biggest bank says it would take something extraordinary to stay the RBA’s hand.
“Quarterly CPI, released tomorrow, will make or break the case for the Reserve Bank of Australia to increase its cash rate,” CBA international economist Samara Hammoud said.
“Financial markets are currently pricing around a 78 per cent chance of a hike.
“There is a risk of a weaker outcome for underlying inflation than consensus.
“However, in our view, it would take a large downward surprise to materially pull down market pricing for a May hike.”
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