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RBA interest rates: Melbourne Cup Day rate rise will leave Reserve Bank isolated

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The Reserve Bank stands alongside the Bank of Japan as the only G7 central banks where markets have locked in forecasts for further rate increases.

Expectations of a Melbourne Cup Day interest rate increase show the Reserve Bank has not done enough to tame inflation and it looks increasingly isolated as markets bet the next move by many of its foreign peers will be a cut.

Macroeconomics Advisory chief economist Stephen Anthony said expectations of further rate increases showed the RBA was behind the curve, and more moves higher were necessary to get inflation back to the central bank’s 2 to 3 per cent target.“Clearly the economy’s performing above trend, and prices are still well and truly away from the band,” he toldThe US Federal Reserve and the European Central Bank are fully priced for 0.25 percentage point rate cuts by June next year.

The RBA’s tightening cycle kicked off in May last year, seven months after the RBNZ, five months later than the Bank of England and two months after the US Federal Reserve started tightening policy.

 

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