RBA strives for a moderate rate hike, despite high inflation

According to a Reuters poll, on Tuesday, the Reserve Bank of Australia (RBA) will raise interest rates again by a modest 25 basis points, despite the record level of inflation registered for the first time in thirty years. The next rate hike is expected in December.

The poll was conducted on October 24–27, and a majority of respondents, 28 out of 32, or 90% to be exact, supposed that at the upcoming meeting on November 1 the central bank will raise the benchmark cash rate to 2.85%. The rest of the respondents suggested that rates will be increased even higher, not by 25, but 50 basis points. 

Earlier this month, the bank’s representatives surprised many economists by raising rates below the expected level. This decision was explained by the fact that they have already grown significantly. However, as inflation has increased to 7.3% in the last quarter, the RBA has to reconsider its initial decision.

Alan Oster, group chief economist at NAB, noted that the RBA is ought to continue the monetary policy tightening in order to bring inflation back to its target level.

Despite the rapid pace of inflation, Oster suggests that the rate hike of 25 basis points is more likely to happen, but at the same time, he doesn’t exclude the possibility of a 50 basis points increase.