Fresh inflation figures set to force RBA into delivering another interest rate blow

Although exact forecasts vary, economists predict inflation will rise to the highest level since 2023, with an overall rate of around 4.8 percent – ​​much higher than the RBA’s target of 2-3 percent.

“Headline inflation will rise sharply in March, driven by the sharp rise in petrol prices following the outbreak of the war in Iran,” Commonwealth Bank senior economist Trent Saunders wrote in the bank’s CPI preview earlier this month.

‘We expect a monthly increase of 1.1 percent, bringing the annual percentage to approximately 4.6 percent.

“Fuel alone is likely to account for 0.9 percentage points of monthly profits, with petrol prices at the pump rising by more than 30 percent over the month.”

While the RBA has already pulled the trigger twice at as many meetings this year, and there are concerns about a slowing economy, the monetary policy board is expected to make it three of three next week.

All four major banks expect a third rate hike of the year next Tuesday – Westpac has even planned two more rate hikes in June and August – and the market estimates a roughly three-quarters chance that the cash rate will be pushed back up to 4.35 percent.

And while there is a chance that tomorrow’s inflation figures could dampen the case for a rate hike next week – and the roughly $91 a month hit it would deliver to the average mortgage holder – the country’s biggest bank says it will take something extraordinary to rein in the RBA.

“The quarterly CPI, released tomorrow, will make or break the Reserve Bank of Australia’s case for raising cash rates,” said CBA international economist Samara Hammoud.

‘The financial markets currently estimate an approximately 78 percent chance of an interest rate increase.

‘There is a risk of a weaker outcome for underlying inflation than the consensus.

“However, in our view, it would take a large downside surprise to materially reduce market prices ahead of a May rate hike.”

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