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Cash Rate Likely To Hit 1.35% Next Month

The Reserve Bank of Australia is expected to hike the cash rate another 0.5 per cent in July, where it will reach 1.35 per cent.

This will follow yesterday’s 0.5 per cent rise, the largest increase in 22 years.

Governor Philip Lowe said “household and business balance sheets are generally in good shape, an upswing in business investment is underway and there is a large pipeline of construction work to be completed” in justifying the raise.

The swift rises are an attempt to curb inflation, which Lowe said “is lower than in most other advanced economies” but “higher than earlier expected.”

Goldman Sachs, Bank of America, HSBC, JPMorgan, Westpac and the Commonwealth Bank have all forecast another 0.5 per cent rise next month.

The Commonwealth Bank has looked further ahead, predicting a 0.5 per cent rise in July, followed by 0.25 per cent increases in August, September, and November.

“That will see the cash rate target at 2.10 per cent by the end of the 2022,” explained CBA head of Australian economics Gareth Aird, who notes the risk of it hitting 2.35 per cent.


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