“The possibility of a pause has become a live option for the RBA this Tuesday” on the back of yesterday’s inflation figures, said Sally Tindall, RateCity.com.au research director.
But while the board has floated the idea of leaving rates unchanged for an interval, it will most likely hike the cash rate by another 0.25 percentage points, given its commitment to returning inflation to the 2%-3% band.
If this happens, it would take the cash rate to a decade-high of 3.1%.
According to RateCity.com.au analysis, another 0.25-percentage-point hike would see the average borrower with a $500,000 loan before the hikes started in May paying a total of $834 more a month. That would also mean a total increase of $1,251 for a borrower with a $750,000 loan, and a total 1,668 increase for a $1 million loan.
All four big banks expect RBA to hike rates by 0.25 percentage points at Tuesday’s meeting, but the peak of the cash rate remains a contentious issue:
“It’s unlikely the RBA will take its foot off the accelerator entirely next week,” Tindall said. “The board has said repeatedly it is prepared to do what it takes to get inflation back under control – one drop doesn’t mean ‘job done.’ This month’s inflation figures recorded a drop but we’re still a long way from the target band of 2% to 3%. With wages moving in the right direction and unemployment dropping back down to 3.4%, the RBA has cover to fire off one last rate hike for the year.”
What do you think will RBA decide to do on Tuesday? State your opinion in the comments section below.
