Economists Divided On Future Rate Hike Before RBA Meet

People are waiting to see if there will be a rate rise. They call it Reserve Bank roulette. This happens every month. The borrowers and experts are ready for anything. A rate rise could happen. It might be a surprise.

The central bank raised interest rates every first Tuesday of the month, except for January and April. It's been happening since May of last year. This caused mortgage payments to go up consistently.

People can't agree on whether the RBA will increase rates at the next meeting. A third of economists think there will be a 0.25% increase, but 3 out of 4 big banks say no change. Investors think there is a 33% chance of a rate increase.

Gareth Aird is an economist at CBA and was one of the few people who guessed the RBA's interest rate increase in May. He thinks there might be another increase in June, but only a small chance of 30%.

The latest economic numbers haven't been good. For example, retail sales in April were not impressive. Also, building approvals fell to their lowest point in 11 years. This information was shared by the speaker.

The RBA might be influenced by the rise in April's consumer prices. This affects inflation psychology. However, the underlying data shows a slowdown which is actually good news. Aird thinks this is encouraging instead of worrying.

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Philip Lowe, the RBA governor's term is ending in September. He said last week that the bank will do what they need to do to prevent inflation, which might include raising rates.

Lowe disagreed with some economists and said that he doesn't think that May's federal budget caused price pressures. He mentioned that the budget may actually decrease inflation in the upcoming financial year. The Albanese government took note of his comments.

The Reserve Bank made a decision on interest rates today. Investors thought there was a 33% chance of a hike to 4.1%. They think there's a 70% chance of it happening by July and it's already fully priced for August.

Alan Oster from NAB stated that Tuesday's rate decision is uncertain. The RBA might wait to check the national accounts of March quarter on Wednesday, released by the Australian Bureau of Statistics.

NAB predicts GDP increase of 0.2% from three months ago. Slowest growth since Sep 2021 when Covid restricted half of the economy.

NAB says RBA might increase cash rate to 4.1% in August. RBA could increase even more. This is what NAB thinks.

The boss of Judo Bank, Warren Hogan, says that the interest rate will increase to 4.1% soon. He thinks that it will happen on Tuesday, but he's not completely sure. He also thinks there will be another rise of 25 basis points in August. Warren has been right before about these things.

Hogan said that they need to slow down the economy. And, it's not slowing down enough. This is the reality.

Some parts of the economy are doing well while others are struggling. Services are getting stronger. Judo's index of business activity went up in May for two months in a row.

The bank said growth was steady, but slower than before. Australian service providers hired more staff to handle heavy workloads.

There was an increase in jobs available recently. The ANZ job ads survey also showed a rise. However, it is 8% lower than September. Nonetheless, it remains at a high level compared to previous years.

The economy is doing okay, even with the recent rate hikes from the Reserve Bank of Australia. Job ads went up a little in May, which is a good sign. However, they've gone down 8% since September. That's still pretty high, though. ANZ Research shared all of this information.

House prices in many big cities are increasing and auctions are clearing at a high rate, almost 79%, as per early numbers from CoreLogic. This is the highest number since October 2021.

Hogan said RBA increased the rate by 300 points from May to December last year. It was an average of 37.5 points per month. The hikes this year were 75 points so far. It is a 15 point average and less than half the pace.

Australia's interest rate is lower than New Zealand's, the US's, and both the Bank of England and Bank of Canada's rates. Australia's rate is 5.5%.

Hogan said the RBA's job isn't done until they get real interest rates to zero after inflation.