SYDNEY, Aug 7, 2007 (AFP) – An Australian interest rate rise Wednesday is almost a certainty, according to economists, creating a political headache for Prime Minister John Howard’s conservative government. The Reserve Bank of Australia (RBA) will announce the results of Tuesday’s monthly monetary policy meeting early Wednesday, with most economists tipping a 0.25 point rise to 6.5 percent.
HSBC Australia and New Zealand chief economist John Edwards said the bank’s fears about rising inflation outweighed concerns over recent sharemarket volatility caused by a shakeout in the US sub-prime mortage market.
“What has so far happened in financial markets is not nearly enough to seriously bother the RBA, let alone delay a tightening,” Edwards said.
Expectations of a rate rise have soared after June quarter price data showed core inflation, which excludes volatile food and energy prices, at 2.75 percent annually, near the top of the central bank’s 2.0-3.0 percent target band.
Unemployment also remains near 33-year lows at 4.3 percent, retail spending remains strong and there are concerns that the economy is facing infrastructure capacity retraints, increasing inflationary pressure.