August rate rise on RBA agenda after inflation increases

The Reserve Bank will have to consider an interest rate rise at its next meeting after an unexpectedly large lift in monthly inflation showed stubborn price pressures across large parts of the economy even as consumers are forced to wind back spending.

The high monthly number prompted analysts to declare the Reserve Bank board meeting in early August would be live. Financial markets put the chance of a rate rise at better than two in five, more than double the expectation before the release of the inflation figures. “The upshot of today’s result is that it places enormous pressure on the Reserve Bank to not only not cut interest rates anytime soon, but potentially lift them further,” he said.

Treasurer Jim Chalmers said the figures showed inflation would be higher if not for the government’s actions, noting the monthly indicator could jump around. “We’ve now had four months in a row of accelerating core inflation. This will no doubt be of concern to the independent Reserve Bank,” he said.

Source: Loan Digest (loandigest.net)

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