Rate rise likely to happen by Melbourne Cup Day – Bendigo Bank

Economist notes service inflation is likely to remain high

Rate rise likely to happen by Melbourne Cup Day – Bendigo Bank


By Jonalyn Cueto

Experts are expecting a rate hike next month following the Reserve Bank of Australia’s announcement to keep the interest rates on hold for the fourth consecutive month.

Bendigo Bank chief economist David Robertson (pictured) advised rate watchers in his recently released October Economic Update that another hike could happen soon, noting interest rates are anticipated to remain high for longer.

“Another hike to 4.35% as early as Melbourne Cup Day remains the expectation, as does our forecast we’ve shared throughout the year - that rate cuts will most likely be a 2025 story, not early to mid-2024,” said Robertson.

He also noted inflation rates are expected to remain moderate in Australia and the rest of the world. Although, there are factors that will challenge the normalisation in Australia, including the rebound of property prices with supply shortage; resilient job markets, as demand for labour persists; and higher energy prices despite government subsidies and support.

Robertson said the next inflation data in Australia will be noted in the third quarter when data are released by Oct. 25, indicating continued declining costs for goods but not for services.

“Services inflation continues to be stubbornly high around the globe, and here tight labour markets, together with abysmal productivity is a major factor,” said Robertson. “To achieve real wages growth and a lower unemployment rate, we need to lift productivity while also decreasing core inflation – which will all take time.

“The next move from the RBA is still more likely to be up than down, and the next read on inflation on 25 October will be critical, but markets are continuing to adjust to the ‘rates higher for longer’ scenario, and its implications.”

What are your thoughts about this economic update? Let us know in the comments section.

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