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RBA interest rate rise: Bank economists say 50bp July hike a certainty, with another in August also likely

The Reserve Bank of Australia should raise interest rates by 50 basis points in July and August, economists believe, with another strong set of inflation data likely to suggest the unprecedented rise is needed.

Bank economists on Friday agreed a 50bp increase when the RBA board meets on Tuesday was highly likely — taking the official cash rate to 1.35 per cent — but Westpac chief economist Bill Evans said another 50bp hike next month would be “the appropriate policy”.

Mr Evans said the current boost to spending — as well as the ongoing strong financial buffers accumulated during the pandemic, with millions of mortgage holders years ahead on repayments, and strong household savings — meant the RBA board would have “considerable confidence” that yet another large rate hike wouldn’t damage the economy in the short term.

“From our perspective the issue becomes one of when it will be appropriate to scale back the rate hikes as uncertainty around the impact of higher rates becomes more real,” he said.

“We do not think policy will reach that stage until after the board meeting in August.”

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