Australian interest rates poised to rise

SYDNEY: The Reserve Bank of Australia is on track to lift interest rates again this week, adding to the cost of servicing mortgages and loans.

The central bank’s board will meet tomorrow to discuss the state of the economy after new inflation data was released last week.

The consumer price index rose at an annual rate of 6.1% in the June quarter, the fastest yearly growth since 2001.

It was followed by a 5.6% lift in the producer price index, which measures wholesale costs for Australian businesses, on Friday.

Now, the RBA must factor the increases into its monetary policy efforts to push the rate of consumer price growth back to its preferred target band of 23%. t

The urgency for action increased after Treasurer Jim Chalmers gave an economic update to federal Parliament, warning inflation was still rising and would likely peak in the December quarter at 7.75%.

The consensus of financial market economists is for the RBA to raise the cash interest rate, for the fourth time in a row, by 50 basis points to 1.85%.

A 50 basis point rate increase will see the average mortgage holder on a variable interest rate paying an extra $610 per month to service their loan compared to four months ago.

But some economists are not ruling out the possibility of a stronger response by the RBA, arguing the central bank could push the cash rate to around 2%.

Graham Cooke, head of consumer research at Finder, said money was already tight for many Australians.

‘‘With inflation skyrocketing to 6.1% — its highest level in more than two decades — many homeowners will be hit with a fourth hike to their mortgage,’’ he said.

‘‘This could cost an average mortgage holder a whopping $7300 extra per year compared to what they were paying in April.’’

The central bank will remain in focus later in the week when it releases its quarterly monetary policy statement containing the RBA’s latest economic forecasts.

The projections due on Friday will be studied to see how they compare with the revised Treasury numbers revealed by Dr Chalmers last week.

Treasury’s latest estimate is for the economy to grow by 3% in 2022/23 and 3% in 2023/24.

Both forecasts were downgraded by half a%age point from the previous outlook in April. — AAP

❛ This could cost an average mortgage holder a whopping $7300 extra per year compared to what they were paying in April