ING economists Deepali Bhargava and Lynn Song anticipate that the Reserve Bank of Australia (RBA) will raise interest rates by 25 basis points at its upcoming meeting, citing ongoing strength in the Australian economy, a tight labour market, and recent upside surprises in both Gross Domestic Product (GDP) and inflation data [1]. The economists highlight that second-quarter GDP growth exceeded expectations and that recent inflation readings have been stronger than forecasted [1].
Looking ahead, ING projects that the August Consumer Price Index (CPI) will accelerate further to 4.1% year-on-year, primarily due to higher diesel and food prices, as well as persistent underlying core inflation pressures [1]. While there are indications of some cooling in the housing market, ING believes the RBA will stress that inflation risks remain skewed to the upside and that continued vigilance is necessary to ensure inflation returns sustainably to target levels [1].
The ING team expects the RBA to deliver a 'decisive' 25bp rate hike, reflecting the central bank's response to an economy that continues to run hot across multiple fronts [1].
CONCLUSION
ING expects the RBA to raise rates by 25bp, driven by persistent inflation and a robust economy. The outlook suggests the RBA will maintain a vigilant stance, with upside risks to inflation remaining a key concern for policymakers.