RBA to raise rates another 50 basis points in July to make up for lost time – Reuters poll

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Australia’s central bank will set another 50 basis point interest rate hike on Tuesday as it struggles to rein in rising inflation.marking the first time it has raised interest rates by that magnitude in back-to-back meetings, according to a Reuters poll.

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After raising its benchmark rate by 50 basis points in an aggressive surprise last month, Reserve Bank of Australia (RBA) Governor Philip Lowe has downplayed the possibility of a 75-point rate hike. basic, which has stopped the speculations of weeks in which the last movement of the Federal Reserve of the United States has been matched.

However, with inflation already hitting its 20-year high, 5.1%, in the first quarter, and expected to approach 7% by the end of 2022, markets are betting that the RBA will have to raise rates more quickly, approaching 3% by the end of the year.

All but one of the 33 economists who participated in the survey carried out by Reuters between June 27 and 30 they expect the RBA to raise the interest rate again by 50 basis points at its meeting on July 5, placing rates at 1.35%. An economist expected a rise of 25 basis points.

Economists have also advanced rate hike expectations considerably since the last survey in June. Nearly 60%, or 18 out of 31, now expect the cash rate to reach 2.00% or more by the end of September75 basis points more than previously forecast.

A handful of economists doubted the neutral rate would be reached or exceeded, given that Australians have A$2 trillion in mortgage debt, making them highly sensitive to borrowing costs amid the growing cost crisis. of the life.

The survey showed that inflation would remain well above the RBA’s target range (2%-3%) until mid-2023. Inflation is expected to average 6.1% this year and decline to 4.0% in 2023, a substantial improvement from the 4.2% and 2.8% forecast in April.

The Australian economy is forecast to grow 4.0% this year and 2.4% in 2023.

Source: Fx Street

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