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Interest charges: Economists ‘genuinely uncertain’ about size of RBA rate hike

There is no doubt the Reserve Bank of Australia will pull the trigger on another rate hike on Tuesday to cool soaring inflation, however the size of the move remains a point of contention.

Just five weeks after raising the cash rate for the first time in over a decade, money markets anticipate the RBA will lift it again — this time by 25 or 40 basis points — and have priced in a series of rate rises that would take rates above 2 per cent by the end of this year.

Independent economist Saul Eslake on Monday said he felt “genuinely uncertain” about how much the cash rate (currently at 0.35 per cent) would rise.

He noted the RBA’s decision to hike the cash rate by 25bp on May 3 was a way of indicating it was returning to “more normal operating procedures”.

“I didn’t find that a very helpful explanation so I’m genuinely unsure now as to whether another step to normality . . . means another 25, or does it mean getting back to (15)?” he said.

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