RBA hold or fold
The Albanese government, and millions of Australian homeowners, will be watching closely to see if this week's inflation data increases the likelihood of a rate hike next month.
Nervousness is building at the highest levels of the Albanese government about this week’s quarterly inflation data. Specifically, there are fears that if the June quarter consumer price index data on Wednesday overshoots forecasts, it will cement an interest rate hike from the Reserve Bank next week. Which would not be great news for a government struggling in the polls and with one eye on the next election.
The consensus among economists, according to Bloomberg, is for headline inflation to hit 3.8% in the year to June. But after the most recent monthly figures overshot expectations, a higher reading is in play, and if that transpires, the RBA will be forced to respond to it.
The RBA “took a calculated risk in not raising rates as aggressively as other countries but will be alert to the dangers of allowing inflation to resume an upward trend or to become entrenched,” KPMG senior economist Michael Malakellis says.
If the CPI spikes higher than expected and the central bank doesn’t stick to its guns with a hike, it will risk eroding its credibility and may also be forced to raise rates even more aggressively down the track to contain soaring prices.
