The stage is set for a November home loan interest rate rise and possibly another rise in mortgage rates in 2007, with a solid rise in consumer prices in the third quarter pointing to inflation pressures in the domestic economy.
An Australian Bureau of Statistics (ABS) report showed the nation's consumer price index (CPI) rose 0.9 per cent in the quarter, for an annual rate of 3.9 per cent. In the June quarter, the CPI rose 1.6 per cent. The median market forecast for the headline CPI was for a rise of 0.8 per cent in the CPI in the September quarter, for an annual pace of 3.8 per cent.
Commonwealth Bank chief economist Michael Blythe said the suggested the central bank would raise rates next month. "Clearly we're still waiting to see what those key underlying measures are, but all indications are that it will be high enough to tick off that November rate rise," he said.
Westpac bank senior economist Andrew Hanlan said the figures confirmed that inflation was a challenge for the economy and the Reserve Bank of Australia (RBA).The RBA's inflation comfort zone for inflation is 2 to 3 per cent. The RBA would likely have to adjust rates following its November 7 board meeting, Mr Hanlan said."We need to see the Reserve Bank nudge things higher and we expect that in November," he said.But depending on how entrenched inflation is in the economy, Mr Hanlan said there is still a risk still that the central bank could raise rates again in February.Mr Hanlan said inflation is being impacted by rising global prices."Those rising global prices are feeding through to the whole pricing chain and we saw that earlier in the week with the producer price index rising quite a bit," he said. RBC senior economist Su-Lin Ong also said the results would put pressure on the RBA to raise rates for a third time this year. "The data and the details today support another hike from the Reserve Bank, most likely in November," she said.
"It (would be) a pretty prudent move given that there are clearly some underlying pressures in the economy." Source AAP
