RBA to Hike Rates Amid Energy Squeeze
The Reserve Bank of Australia (RBA) is poised to raise interest rates next week as fuel prices surge. Bloomberg Economics predicts a quarter-point hike to 4.6% and warns of another increase in November. Market participants largely agree, pricing a nine-in-ten probability of the rate rise.
ANZ now expects an extra increase in September on top of its previous call for a November hike, while UBS has revised its forecast to include back-to-back increases in both months. Both banks predict the peak rate will be 4.85%, last seen in 2008.
The RBA's decision is influenced by rising energy costs, with Brent crude holding above $100 a barrel. Governor Michele Bullock noted that several upside risks are materializing, and Assistant Governor Sarah Hunter emphasized the board's concern about inflation, which is skewed to the upside due to the conflict in the Middle East.
The RBA meets on September 28-29, with key speakers including Governor Bullock and independent director Iain Ross. Meanwhile, fuel prices have jumped 16 cents in a week, the sharpest weekly rise since mid-June, according to Australian Institute of Petroleum data.