Michele Bullock to lead first RBA meeting as governor with board set to keep rates at 4.1 per cent

Millions of homeowners are expected to be spared another punishing rate hike, but the RBA is set to issue a warning that further increases are yet to come.

Freshly minted Reserve Bank governor Michele Bullock will hand down her first cash rate decision on Tuesday afternoon, with the market almost unanimously foreshadowing rates will be held steady at 4.1 per cent.

In her first board meeting in the top chair, Ms Bullock is tipped to keep the rate steady for the fourth consecutive month, to allow the previous 12 hikes time to filter through the economy.

Typically, changes to interest rates take about 12 to 18 months to completely work through the economy; but an increase in fixed-rate lending during the pandemic has prompted some economists to warn that could take even longer in this tightening cycle.

Despite the anticipated further reprieve, the bank is set to warn that persistent price pressures stemming from high petrol prices and rents are a risk to the bank’s hard work over the last 16 months to return inflation to target.

RBA governor Michele Bullock leads her first board meeting in the role on Tuesday. Picture: NCA Newswire / Gaye Gerard

Traders had ascribed just a one-in-10 chance that the RBA would increase the cash rate to 4.35 per cent at Tuesday’s meeting; but the market has warned that the likelihood of another hike before the year ends now sits at 62 per cent.

It’s widely anticipated that the central bank will hike rates once again before the year is over, which the RBA itself had previously indicated may be needed to ensure inflation returns to its two-to-three per cent target band.

The latest ABS monthly inflation figures show that in the year through to August, inflation rose 5.2 per cent – up from 4.9 per cent the month prior – spurred by fuel and rents.

Ahead of the decision, economists predicted that because those CPI components are less consumer driven, and paired with weaker retail data and consumer confidence, there were signs there that the RBA’s concerted effort to slow the economy was working.

It comes as new data from the RBA – released over the weekend under Freedom of Information – suggests that more Australians are now using credits cards to cover essentials as prices surge.

The research also shows that almost one-fifth of Australians with a home loan are spending more than 30 per cent of their household income on repayments, up from 14.5 per cent of people before the rate hike cycle began last May.

A replacement for Ms Bullock’s former role as deputy governor has yet to be filled.