Higher-than-expected inflation figures could trigger rates rise

Pressure will grow on the RBA to consider an interest rate increase following news the consumer price index rose 0.9% in the June quarter, according to the Australian Bureau of Statistics.

The latest quarterly inflation data takes the annual rate to 3.6%, higher than the 3.4% predicted by economists.

Westpac had predicted a quarterly inflation figure of 0.7%.

The RBA flagged the June inflation figure as one of the key determinants of future interest rate policy.

Commenting on the June CPI figure, ANZ economists Warren Hogan, Katie Dean and Riki Polygenis, said in normal circumstances, the RBA would respond to such a number with an interest rate rise at its next meeting.

"However, given heightened global uncertainty and weak domestic confidence (consumer and business), we do not think the RBA will respond immediately," the economists said.

Tim Waterer, senior FX dealer at CMC Markets, said with inflationary pressures clearly present, “an RBA rate hike before the year ends is now well and truly back on the agenda”.

“Recent talk of possible rate cuts seems but a distant memory as evidenced by the AUD/USD's swift ascent through $1.105,” he adds.

The RBA will next make a decision on interest rates on August 2.

The higher than expected inflation number saw the Australian dollar surge past $1.10 to $1.1065 a post-float record for the currency, rising by almost 1 cent.

It was recently trading at $1.104.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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