Australia Set for Back-to-Back Rate Hikes Amid Split on Size

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Australia’s central bank is poised to implement back-to-back interest-rate increases for the first time in 12 years on Tuesday, economists and traders predict, with the key debate centering on the size of the move, Bloomberg News reported. Reserve Bank of Australia Governor Philip Lowe and his board will raise the cash rate by 25 basis points to 0.60%, according to 15 of 29 economists surveyed by Bloomberg. Three analysts see a half-point rise, while the remaining 11, as well as money markets, forecast a larger 40-basis-point hike. The RBA began tightening in May following a sharp acceleration in inflation, bringing it in line with peers like the Federal Reserve and the Bank of England. Figures last week showed solid momentum in the A$2.2 trillion ($1.6 trillion) economy and rising labor costs, fanning fears of even faster price gains ahead. “Policy needs to lean more strongly against the broadening of inflation pressures,” said Felicity Emmett, a senior economist at Australia and New Zealand Banking Group Ltd. “The strength of the price and wage measures in the GDP data should be enough” to persuade policy makers to hike by more than the regular quarter point, she said. The nation’s four major lenders are also divided: Commonwealth Bank of Australia and National Australia Bank Ltd. are predicting a 25-basis point hike; while ANZ and Westpac Banking Corp. are forecasting a 40-basis point increase. Read more.
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