Australia's three major banks are now warning mortgage holders to brace for another interest rate rise next week as surging oil prices and stubborn inflation pile fresh pressure on the Reserve Bank.
asserted
prices → warn → Bank
Commonwealth Bank, Westpac and ANZ are all forecasting a 25-basis-point hike, with ANZ bringing forward its call from November and now expecting another increase to follow.
'
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increase → forecast → November
The ongoing escalation of the conflict in the Middle East and the tendency of the RBA to view the resultant increase in oil prices as much more of an inflationary shock than a growth shock suggests that a single 25 basis points rate hike in November… is no longer the most likely outcome,' said Adam Boyton, ANZ's head of Australian economics.
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Boyton → view → economics
Markets are betting the RBA will lift rates to 4.6 per cent next week.
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RBA → bet → cent
Another rise to 4.85 per cent is expected early next year, while traders see a good chance of another hike by the middle of the year.
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traders → expect → year
That would take the cash rate above 5 per cent, its highest level since 2008.
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That → take → 2008
Westpac chief economist Luci Ellis, who worked at the RBA for more than three decades, warned of the upcoming rate hike.
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who → work → hike
'Communication has clearly escalated over recent days,' she said.
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she → escalate → days
'In particular, Governor Bullock today flagged that upside risks to inflation appeared to be materialising.
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risks → flag → inflation
Westpac chief economist Luci Ellis, who worked at the RBA for more than three decades, warned of the upcoming rate hike
'
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who → work → hike
Materialisation of those upside risks was the conditionality set in August for further rate hikes, noting that the forecasts published in August did not support further rate hikes.'
She pulled forward her expectations for the next rate increase from November to September.
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She → set → September
Bullock told a parliamentary hearing in Canberra that it appeared inflation was worse than the central bank had expected at its last meeting in August.
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bank → tell → August
At the time, Bullock said inflation risked coming in above the bank's forecasts and, if that happened, it might have to raise rates again.
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it → say → rates
'Developments since then suggest that, although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising,' Bullock said on Friday.
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Bullock → suggest → Friday
Bullock's testimony to a House of Representatives committee was the latest in a string of hawkish appearances by top RBA officials that have convinced economists and traders that the bank is more determined to get inflation under control, even at the expense of jobs.
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bank → convince → jobs
Inflation was too high, Bullock said, retiring the bank's narrow path for good.
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Bullock → say → path
'The bottom line is that we need to get inflation back down because if we don't, that is a worse outcome across the board,' she said.
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she → need → board
The Iran war, the AI boom and a particularly strong El Nino have heaped pressure on energy, food and tech prices.
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war → heap → prices
Inflation is still too high to lower rates, the Reserve Bank warns
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Bank → lower → rates
There is little sign of resolution in the Middle East conflict,' she added.
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she → be → conflict
The benchmark Brent crude price remained above $US104 a barrel following attacks by Iran-backed Houthi forces on Saudi Arabian oil infrastructure.
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price → remain → infrastructure
Commonwealth Bank head of commodities Vivek Dhar warned prices could be forced to rise as high as $US150 a barrel.
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prices → warn → US150
Global oil supplies were still diminishing at the same time as China was ramping up oil imports.
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China → diminish → imports
Mr Dhar estimated there might be only five to 10 weeks before global oil and fuel inventories run dry.
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inventories → estimate → ?
'Inventory depletion raises the risk that Brent oil futures need to rise to $US150 a barrel to trigger uncontrolled demand destruction (i.e. where high prices force lower demand) in emerging and developing Asian economies,' he wrote in a research note.
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he → raise → note
For Australians, the big risk is a fresh cost-of-living hit: higher oil prices would flow fairly quickly into petrol and diesel, then into freight, airfares and some grocery prices.
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prices → flow → freight
As firms increasingly saw no end in sight to the war and price increases, they were growing more inclined to pass on costs to consumers, which risked entrenching inflation, Bullock said.
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Bullock → see → inflation
Businesses had delayed passing on price increases for as long as possible, but they could not go on much longer, said Andrew McKellar, chief executive of the Australian Chamber of Commerce and Industry.
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McKellar → delay → Commerce
'Profitability and cash flow are under real pressure, particularly for smaller businesses,' he told reporters in Canberra.
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he → tell → Canberra
Higher-for-longer interest rates and fuel prices would hit economic growth, but that has been swamped by the AI boom, which has pushed up demand in a way the central bank did not foresee.
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bank → hit → way
'We're just back from the US and in addition to ... the upside risk of inflation from the Middle East, what is also very striking is how strong the AI and tech boom is and has been,' the bank's deputy governor Andrew Hauser said.
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governor → say → East
After inflation came in hotter than expected in July, money markets have steadily raised the chance of a September rate hike.
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markets → come → hike
Advanced economies around the world were entering a higher interest rate environment after recent rises by the Federal Reserve and the Bank of Japan, Treasurer Jim Chalmers said.
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Chalmers → enter → Japan
'Markets are expecting multiple interest rate hikes in other countries and that's because the war in Iran, which has dragged on and dragged out for more than six months now, has pushed up inflation very substantially.'
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which → expect → inflation
The Aporia
