Australian investors could wake up next month with their annual horse racing hangover and a second consecutive interest rate hike.
The Reserve Bank of Australia (RBA) left the cash rate unchanged yesterday at 6.50 per cent, but according to ICAP senior economist Matthew Johnson the rate is likely to rise again before year end.
"The RBA has already indicated that they are happy with a de facto cash rate of 6.75 per cent, so if credit markets continue to ease, and data continues to print firm, I expect that the RBA will be looking to raise the official cash rate to 6.75 per cent at the November or December meeting," Johnson said.
The RBA remains concerned about global turmoil in the financial market, but as it did in August will address with domestic inflation and demand problems first, he said.
"I suspect that the RBA would like to move on their tightening bias - elections permitting," Johnson said.
On November 8 2006 the RBA lifted the cash rate 0.25 per cent to 6.25 per cent. In August rates rose another 0.25 per cent to 6.50 per cent.
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