RBA to raise rates another modest 25 basis points in December – Reuters poll

By Shaloo Shrivastava and Anant Chandak

BENGALURU (Reuters) – The Reserve Bank of Australia will go for another modest 25 basis-point interest rate hike on Dec. 6 to 3.10%, its third in a row after a succession of half-point moves, according to all 30 economists polled by Reuters.

One of the last central banks to join a global tightening campaign and the first major one to shift down to smaller moves, it was expected to stick to that path over the coming months as inflation showed signs of cooling.

Inflation cooled to 6.9% in October from 7.3% the prior month but is still far above the RBA’s target range of 2%-3%.

“We had a bit of softness in the consumer spending data and a bit of a drop in inflation. That would suggest that they would stick to 25,” said Marcel Thieliant, senior Australia economist at Capital Economics.

While consumption was still holding up, house prices, which are sensitive to higher mortgage rates, were showing signs of a sustained slowdown.

Up 25% during the pandemic years alone and among the most expensive in the world, Australian house prices have fallen 6.5% on average so far this year and were expected to drop another 9.0% in 2023, a separate Reuters survey showed.

The RBA is forecast to raise rates by another 50 basis points by the end of the second quarter next year, according to the median forecast, taking the terminal rate to 3.60%. Those expectations were unchanged from a November poll.

However, there was no clear majority among economists over the central bank’s rate move beyond the December meeting.

While 12 of 30 economists expected the cash rate to go up by 50 basis points in Q1 2023, 11 said 25 basis points, one said 40 basis points and six expected no change.

For the following quarter, 15 of 29 see rates at 3.60% or higher, the other 14 said lower with some seeing the peak as low as 3.10%.

(Additional reporting by Anant Chandak in Bengaluru; Polling by Vijayalakshmi Srinivasan and Maneesh Kumar; Editing by Hari Kishan and Matthew Lewis)