Australian homeowners can expect rates to rise again when the Reserve Bank meets next month.
Economists are now predicting that interest rates will rise another 0.50 percentage point in October.
Earlier this month, the central bank raised its spot interest rate by 50 basis points to 2.35 percent, its fifth hike in as many months.
However, in the minutes of the Reserve Bank of Australia meeting in September, there was discussion about whether to raise interest rates by just 0.25 percent – a discussion that had not taken place in August.
“They recognized that monetary policy is working with a delay and that interest rates had been raised quite quickly and were moving closer to normal settings.”
But the importance of bringing inflation back to target and the “potential damage” of continued inflation, combined with relatively low cash interest rates, led to the 0.50 percent increase.
Board members nevertheless reiterated that the central bank was not on a predetermined path and would be in equilibrium to “balance the economy”.
Westpac chief economist Bill Evans said he expects another 0.5 percent increase in October.
But he expects the central bank to slow rate hikes to quarter points in November, December and February, where rates will peak at 3.6 percent.
“Clear evidence of the expected slowdown in inflation will not become apparent until the end of February, leaving the RBA in March to wait for evidence that growth is slowing and that inflation and rates have also peaked in the US,” it said. he.
David Plank, head of ANZ Economics, noted that it would be bad for the RBA to pass a smaller rate hike next month if inflation, which will be updated in late October, beat expectations.
“We think this kind of ‘backflip’ would damage the credibility of the RBA,” he said.
“Inflation, wage growth, the labor market and/or inflation expectations will be key to resuming tightening in February.”