Rate rise likely: ANZ

Property investors and buyers should be bracing themselves for an August rate rise, according to Katie Dean, head of Australian economics at ANZ.

Dean made the prediction on the back of a “hawkish” speech by RBA governor Glenn Stevens on economic conditions and prospects on June 15.

Stevens said that if RBA current economic forecasts were correct, “further tightening of monetary policy is likely to be required at some point for inflation to remain consistent with the 2% to3% medium-term target”.

According to Dean, the next quarterly inflation figures will be key to the RBA decision. These figures are to be released at the end of July, just ahead of the August 2 RBA board meeting.

Should inflation rise by 0.7% or more, and barring any increase in the unemployment rate between now and then, ANZ expects this will trigger a move on rates.

Dean says if the forecasts are right “and assuming there is no big divergence between the governor and the RBA board, then it not a matter of if the bank tightens, but when”.

“We continue to expect August as the next window.  We suspect a core inflation read of at least 0.7% quarter to quarter (which would be in line with the RBA’s latest forecasts) would, barring another notable downswing in the activity data, likely be enough to get the board over the line,” she says.

Similar to the minutes from the May board meeting, Dean says the June 15 speech effectively played down some of the current major arguments against a further monetary policy tightening.

The RBA will next decide on further interest rate rises on July 5.