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Reserve Bank to respond to inflation data

Reserve Bank deputy governor Guy Debelle will have the opportunity to respond to the latest inflation figures and whether it changes the interest rate outlook when he faces senators on Thursday.

September quarter data showed the annual rate of underlying inflation – which smooths out excessive price swings and is linked to interest rate decisions made by the RBA – unexpectedly jumped to 2.1 per cent.

It was the strongest result in six years and took it within the central bank’s two to three per cent inflation target.

The RBA has repeatedly said it would not lift the cash rate until inflation was sustainably within the target band, something it has not expected before 2024.

While economists do not expect the RBA to lift the cash rate anytime soon, some believe the inflation brings forward the timing of an interest rate rise, possibly as early as late next year.

The RBA will hold its monthly board meeting next Tuesday.

Dr Debelle will appear before a Senate estimates hearing with assistant governor for the financial system Michele Bullock.

The hearing will separately quiz the Australian Securities and Investment Commission and the Australian Prudential Regulation Authority.

Earlier this month, APRA announced it wanted retail banks to ensure new loan applicants are capable of paying a much higher interest rate than the one being offered.

This came against the backdrop of house prices rising at their fastest pace in more than 30 years and strong demand for mortgages.

APRA chair Wayne Byres said the action was designed to reinforce the stability of the financial system.

Meanwhile, and following on from Wednesday’s consumer price index for the September quarter, the Australian Bureau of Statistics will issue its international trade price indexes for the same period.

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