RBA to hike rates for a fourth time<\/a> to take the rate to 4.6 per cent at some point before March 2027.<\/p>\nThe central bank delivers its next decision on whether to hike or hold the cash rate on August 11. Money market traders lowered the odds of an August interest rate rise to just 4 per cent, down from 20 per cent, after the data inflation release.<\/p>\n
Deloitte Access Economics partner Stephen Smith warned the numbers would keep the Reserve Bank on \u201chigh alert\u201d.<\/p>\n
\u201cFalling oil prices and the government\u2019s temporary fuel excise cuts took the heat out of the price of imported goods, but price pressures in the service economy that are not necessarily linked to the Middle East conflict picked up, suggesting that homegrown inflationary pressures are yet to be tamed,\u201d he said.<\/p>\n
VanEck head of investments and capital markets Russel Chesler, meanwhile, said inflation was now \u201centrenched\u201d.<\/p>\n
\u201cIt is looking like a pipe dream that it will come back within the RBA\u2019s target band by the end of 2027,\u201d he said, adding that July\u2019s fuel price shock, the lift in award and minimum wages and a resilient labour market could generate higher inflation prints across the second half of the year.<\/p>\n
Oxford Economics Australia head of economic research Harry Cruise predicted the RBA would likely \u201chold\u201d rates at 4.35 per cent next month. <\/p>\n
\u201cWhile annual trimmed mean inflation rose, it increased by less than markets expected,\u201d he said.<\/p>\n
\u201cAll that backs up our view that the RBA will keep rates on hold next month. Underlying inflation is not just resisting pressure to rise. In quarterly terms, it is continuing to ease.\u201d<\/p>\n
RBA Governor Michele Bullock has flagged more rate pain could hit home soon. <\/p>\n
In a hawkish speech on Tuesday, she stated bluntly that out-of-control inflation was at risk of becoming embedded and the RBA would \u201cincrease the cash rate further\u201d if needed. <\/p>\n
\u201cThe further inflation moves from target, and the more embedded it becomes, the harder it is to reverse. Credibility is hard-won and easily lost,\u201d she said.<\/p>\n
\u201cThe Board is prepared to act as required to achieve its mandate, including by increasing the cash rate further if needed.\u201d<\/p>\n
She also warned that \u201cputting off\u201d rate hikes could lead to higher interest rates and unemployment over time, referencing Australia\u2019s experience of stagflation in the 1970s and recession in the 1980s. <\/p>\n
But IG senior analyst Tony Sycamore said the cooler inflation print would likely stop an August rate hike.<\/p>\n
\u201cThe Australian rates market is now pricing in just 1 basis points of rate hikes for the RBA\u2019s August Board meeting, extending the decline from last week when 10bp was priced in after the stronger jobs report,\u201d he said.<\/p>\n
\u201cLooking further out, 12bp of RBA hikes are priced for the remainder of 2026, down from a full 25bp hike for November priced last week.\u201d<\/p>\n
Westpac chief economist Luci Ellis said the RBA would hold rates for the remainder of the year, reversing an earlier forecast of hikes. <\/p>\n
\u201cInflation has been more benign than we feared and the RBA forecast,\u201d she said.<\/p>\n
In June, the largest contributor to annual inflation was housing, the ABS said, which jumped 6.8 per cent from a surge in electricity costs.<\/p>\n
\u201cElectricity remains one of the biggest contributors to annual inflation, with costs 22.4 per cent higher than 12 months ago,\u201d ABS head of price statistics Rachael McCririck said.<\/p>\n
\u201cThis is largely because government rebates which reduced household electricity bills have ended.<\/p>\n
\u201cAnnual inflation for new dwellings has reached its highest level in almost three years, at 5.8 per cent. This was driven by builders passing on higher material and labour costs.\u201d<\/p>\n
The next biggest contributors were food and alcoholic beverages and recreation and culture, both lifting 3.3 per cent.<\/p>\n
Zyft consumer finance expert Joel Gibson said there was \u201cno breathing room\u201d for millions of Aussie households. <\/p>\n
\u201cThere has been no respite, no breathing room, and the national belt-tightening exercise hasn\u2019t stopped,\u201d he said.<\/p>\n
\u201cFollowing three consecutive RBA rate hikes earlier this year, Australian families are dealing with an unrelenting, compounding cost-of-living squeeze hitting mortgage repayments, insurance, energy bills, fuel and supermarket trolleys all at once.<\/p>\n
\u201cFor Aussies doing it hard week after week, the biggest drivers of annual inflation over the past 12 months continue to be the absolute non-negotiables \u2013 housing and essential goods.\u201d<\/p>\n
Inflation pressures are also rising on the back of a second eruption of violence in the Middle East, shutting off the crucial Strait of Hormuz shipping lane and triggering a fresh surge in energy prices. <\/p>\n
BNY APAC macro strategist Wee Khoon Chong warned that inflation remained \u201csticky\u201d.<\/p>\n
\u201cOverall, the data reinforce the view that inflation remains sticky, rather than signalling a decisive disinflation trend,\u201d he said.<\/p>\n
\u201cCombined with a resilient labour market and a buoyant equity market, the Australian economy remains on a solid footing. This should support the RBA\u2019s hawkish bias, although the data are not strong enough to justify a resumption of rate hikes.\u201d<\/p>\n
Read related topics:Value Vault | Money Saving Tips & Cost of Living News<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Aussie homeowners face a high risk of another interest rate hike despite a shock dip in inflation 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