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Bond markets price over 80% chance of a Reserve Bank rate hike on Tuesday
Bond markets are pricing a more than 80 per cent chance of a Reserve Bank rate hike on Tuesday.
Key points
- Hot inflation in the September quarter and hawkish comments from central bank leaders drove the pricing.
- HSBC chief economist Paul Bloxham said the RBA is likely to deliver a fifth hike this week.
- AMP chief economist Shane Oliver does not expect rates to come down until the December quarter 2027.
Why it matters. Mortgage holders face interest rates at their highest level since 2008, and Shane Oliver says that absent a crisis, rate relief is a long way off.
Australian bond markets are pricing a greater than 80 per cent likelihood the Reserve Bank lifts rates on Tuesday, after hot inflation in the September quarter. HSBC chief economist Paul Bloxham says the RBA is likely to deliver a fifth hike this week, while AMP chief economist Shane Oliver sees no rate relief until the December quarter 2027. Treasurer Jim Chalmers said the government would slash spending in December's mid-year budget update to put a lid on inflation.
Latest updates
Bond markets price over 80% chance of a Reserve Bank rate hike on Tuesday
Bond markets are pricing a Reserve Bank of Australia rate hike at its meeting on Tuesday at greater than 80 per cent. The expectation follows stronger-than-expected inflation in the September quarter and hawkish comments from the central bank. The treasurer said "there is more work to be done" to tighten the government's budget belt. Labor is facing accusations that out-of-control spending is fuelling inflation, which it has rejected. Borrowers have been told interest rates might not begin coming down until the end of 2027, and rates are expected to stay high for an extended period.
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Markets Expect RBA Rate Rise on Tuesday as Underlying Inflation Stays High
Bond markets and most economists have swung behind a Reserve Bank of Australia rate hike on Tuesday. The decision follows hot inflation figures and hawkish commentary from governor Michele Bullock the previous week. In annualised terms, the trimmed mean measure of underlying inflation was 3.7 per cent. That is the 20th consecutive quarter that underlying inflation has sat above the midpoint of the Reserve Bank's two to three per cent target band. A Middle East oil shock and rising prices have added to the pressure.