IMF Warning Pushes Rate Hike Odds to 82%

The International Monetary Fund (IMF) has warned that Australia's Reserve Bank of Australia (RBA) may need to raise interest rates again due to persistent underlying inflation. The IMF's warning comes as financial markets are increasingly convinced a September rate increase is coming, with an 82% chance priced in for a 0.25 percentage point increase at the next meeting.

RBA Governor Michele Bullock has also expressed concerns about inflation risks materializing, including the impact of the Middle East conflict on energy prices and the huge investment boom in AI and data centres. Bullock emphasized that reducing inflation is essential to protect all Australians, particularly those with lower incomes and vulnerable financial positions.

While a September rate hike is now more likely, it's still not a certainty. The RBA has over a week to consider new data before making a decision. If the cash rate does increase by 0.25 percentage points, mortgage repayments for a $1 million loan would rise by approximately $150 per month.