Australian interest rates are expected to rise again next week with new figures yesterday showing that inflation was higher than expected in the third quarter.
Australia became the first major economy to boost rates since the onset of the global economic crisis when the central bank increased its cash rate in a surprise move earlier this month. The central bank board’s next rate meeting is on Tuesday.
At its Oct. 6 meeting, the Reserve Bank of Australia boosted the official cash rate by a quarter percentage point to 3.25 from a 50-year low.
Economists predicted another quarter percentage point hike next week after the Australian Bureau of Statistics yesterday showed inflation had risen 1 percent for third quarter for an annual rate of 1.3 percent.
Prices rose with big hikes in electricity charges, oil and household water.
Economists had forecast a 0.9 percent rise in the quarter, for an annual pace of 1.2 percent.
Su-lin Ong, senior economist with RBC Capital Markets, the corporate and investment banking arm of Royal Bank of Canada, said the central bank would try to dampen inflation before Australia’s economic recovery gathered pace.
“That tells you that a cash rate at 3.25 percent is too low,” Ong said of the latest inflation figures.
She expects a quarter point rate hike next week followed by another quarter point hike before the end of the year.
Commonwealth Bank of Australia chief economist Michael Workman also tipped a quarter percentage point hike next week.
Treasurer Wayne Swan, who declined to comment on the likelihood of rate changes, said the latest 1.3 percent annual inflation rate was the slowest in a decade.
“Overall, we’re continuing to see an easing of inflationary pressures in the economy,” Swan told reporters, adding that business investment remained weak and unemployment was expected to rise.
After the last rate rise, central bank governor Glenn Stevens said the worst of the global financial crisis was probably over for Australia and flagged further rises to contain the threat of inflation.
The cash rate peaked at 7.25 percent before the central bank slashed 4.25 percentage points over six monthly meetings since September last year.
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