Another rate rise expected despite moderating inflation

Mike Taylor

Managing Editor/Publisher, Financial Newswire

27 July 2023

Key investment managers are predicting at least one more Reserve Bank of Australia rate increase despite today’s better than expected inflation figures and the relative optimism of the Treasurer, Jim Chalmers.

Both HSBC and Barclays acknowledged the better than expected Consumer Price Index (CPI) result but noted that inflation was still above target with HSBC suggesting that while the RBA was “nearing the end of its hiking phase our central case is for only one more hike”.

For its part, Barclays said that while inflation continued to decelerate, with underlying price pressures also lower it still had concerns about inflation.

“We think the increase in wage-pull inflation, especially for services, will keep the RBA concerned and lead it to hike one more time. We continue to see the August meeting as the most likely time, but note some risk of a delay.”

Discussing the CPI figure today, Treasurer Chalmers said the ABS data show the price pressures in the economy continued to moderate in welcome ways.

“It’s pleasing that inflation is moderating, and while we would prefer it moderate more quickly to ease pressure on household budgets, we are making progress,” he said.

“We know that inflation remains high but today’s data confirms we are heading in the right direction,” Chalmers said.