RBA Set to Raise Interest Rates Amid Rising Inflation

The Reserve Bank of Australia (RBA) is set to face a challenging decision regarding interest rates, with underlying inflation remaining above its target range of 2-3% at 3.6%. The labour market remains tight, and rising oil prices due to the war in the Middle East are contributing to increased costs for goods and services.

Major banks have updated their forecasts, with four major lenders predicting a 0.25 percentage point increase in rates today, while ANZ also forecast a second hike of the same size in November. A rate rise would take the cash rate to its highest level since November 2011 or, if there's another hike, to its highest level since November 2008.

Many banks have already started moving their fixed rates in anticipation of a fourth rate hike this year, and brokers are warning that tighter monetary policy is denting buyer confidence, particularly among first home buyers. Finsure CEO Simon Bednar said borrowers face a longer period of potential pain regardless of the RBA's decision.