Why some experts still predict another RBA rate rise
The Reserve Bank of Australia’s cash rate decision is expected to result in maintaining the current rate at 4.35%, according to a survey. However, economists are keeping a watchful eye on potential increases later this year.
Insights from a recent Finder survey, which involved 38 economists and financial experts, revealed an overwhelming consensus of 92% predicting a rate hold today.
The longer-term outlook, however, appears more divided. Nearly half of these experts, 44% to be precise, anticipate at least one more rate hike by the close of 2026.
This begs the question: Why do some forecasts predict another increase in interest rates?
Andrew Wilson from My Housing Market explained to Finder that persistently high inflation is a significant factor. Despite a decrease, the preferred inflation measure of the RBA remains well above its target of 2 to 3%.
He pointed to higher fuel, electricity, rental and construction costs as potential sources of further inflationary pressure.
Queensland University of Technology adjunct professor Noel Whittaker also told Finder the decision was a “line ball call”, citing rising fuel and construction costs, uncertainty around the war in the Middle East and reports of continued strong consumer spending.
The concern is that if spending remains resilient while inflation stays above target, the RBA may need to do more to cool demand.
But the case for a hold remains stronger for now.
ANZ’s Madeline Dunk told Finder that lower-than-expected trimmed mean inflation and a higher-than-expected unemployment rate give the RBA room to wait and see how the economy evolves.
AMP chief economist Shane Oliver said the latest inflation, labour and housing data should allow the RBA to remain in “wait and see” mode, although he expects the bank to retain a tightening bias while inflation remains too high.
So while today’s decision is widely expected to be a hold, the possibility of another hike has not disappeared from the outlook.
— Mikele Syron