RBA Rate Hike Hopes Dashed by Soaring Inflation Expectations

The Reserve Bank of Australia (RBA) is set to make its next interest rate decision soon, but new inflation data may dash hopes for another hike. According to RBA Governor Michele Bullock, higher interest rates are already slowing down the economy as intended. However, analysts expect the latest data to show that underlying inflation remains high.

The Australian Bureau of Statistics is due to release its June quarter inflation figures on Wednesday, and economists forecast that the trimmed mean measure will climb even higher to 3.7 per cent. This would reinforce concerns about inflation staying above the RBA's target band of 2-3 per cent.

For the past four years, Australia has experienced above-target inflation since the COVID-19 pandemic, with underlying inflation holding above the central bank's target of 2.5 per cent. This trend has been a cautionary tale for the Reserve Bank board, Bullock said on Tuesday.