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Markets Expect RBA Rate Rise on Tuesday as Underlying Inflation Stays High
Markets expect a Reserve Bank of Australia rate rise on Tuesday as underlying inflation stays high.
Key points
- Trimmed mean inflation rose 1 per cent in September, above the Reserve Bank's 0.8 per cent forecast.
- Home values fell 1.1 per cent in September, and the housing downturn is on track to be the deepest on record.
- The Nasdaq lost 2.86 per cent to close at 25,437.00 on Friday after disappointing results from Intel and Amazon.
Why it matters. A fifth rate rise this year would bring the cash rate to 4.85 per cent, the highest since 2008, adding to pressure on households with mortgages.
Bond markets and most economists have backed a Reserve Bank of Australia hike on Tuesday after governor Michele Bullock's hawkish remarks the previous week. The trimmed mean rose 1 per cent in September, above the bank's 0.8 per cent forecast, or 3.7 per cent annualised. A fifth rise this year would lift the cash rate to 4.85 per cent, the highest since 2008, while a $600,000 mortgage would cost an extra $456 a month in interest, according to Canstar.
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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.