The RBA board will meet in the first week of August, with experts suggesting a strong inflation read to be released this week could push it to hike the cash rate.
The RBA board has hiked the cash rate 13 times since mid-2022 in an effort to regulate inflation, but the pace of growth in the cost of goods and services may still be too fast for its liking.
The cash rate is currently sitting at a 12-year high of 4.35%, driving the typical interest rate on a new, owner-occupied, variable rate mortgage to 6.30% per annum (p.a.).
That would see a borrower taking out an average new home loan ($626,000) paying $3,875 a month in mortgage repayments - a figure that could jump by $100 if rates were to rise another 25 basis points.
See also: Mortgage repayment calculator
According to many experts, including those at the big four banks, consumer prices could have risen more than the RBA has forecasted in the June quarter.
If that is the case, it could force the central bank to increase interest rates once more.
The RBA board will announce its upcoming cash rate decision on Tuesday 6 August.
If you hold a variable rate mortgage, you're in the market for a home loan, or you're considering refinancing, it could be worth keeping an eye out for news on inflation until then.
Expert predictions on inflation
The Consumer Price Index (CPI) for the June quarter will be released by the Australian Bureau of Statistics (ABS) on Wednesday.
The RBA is expecting consumer prices to have risen 3.8% over the 12 months to the June quarter.
That forecast is also anticipated by experts at two of the big four banks - Westpac and NAB - while CommBank and ANZ are forecasting reads of 3.7% and 3.9% respectively.
|
Prediction for quarterly headline CPI (on an annualised basis) |
|
|
RBA |
3.8% |
|
CommBank |
3.7% |
|
Westpac |
3.8% |
|
NAB |
3.8% |
|
ANZ |
3.9% |
However, an upside surprise (as recent quarterly inflation reads have tended to bring) could prove dire for home loan holders.
What inflation read could force the RBA to hike?
ANZ predicts that, if headline inflation were to have increased 4.1% on an annual basis, it would be an "uncomfortable outcome" for the RBA board, presenting it with a "difficult judgement call".
"We wouldn't expect an inflation result in line with our forecasts … to result in RBA tightening, especially given the move higher in the unemployment rate over the past year, sustained weak GDP growth, low levels of consumer confidence, and deteriorating business conditions," ANZ economists said.
CommBank and NAB are in agreement, with NAB senior FX strategist Rodrigo Catril saying "the RBA would have little choice but to hike rates again" if CPI shows a quarter-on-quarter increase of more than 1.1%.
On the other hand, Westpac chief economist and former RBA assistant governor Luci Ellis argues that Australia is simply "not that special" when it comes to economic trends.
"After a few wobbles, disinflation has resumed in the United States, Canada, and New Zealand," she said.
"Anyone arguing that the RBA is a long way from cutting would need to show why Australia would not follow the same broad disinflation trend as its peers."
Image by Anne Preble on Unsplash
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