Stubborn inflation could spell November interest rate hike

Incoming data over the next three weeks will heavily influence the Reserve Bank’s decision on whether to hike rates on Melbourne Cup day.

The potential of an interest rate rise in November could give some punters pause for thought as they plan their Melbourne Cup Day bets.

Two major data releases over the next three weeks will play a major role in the Reserve Bank of Australia’s (RBA) November 7 meeting, their penultimate rates decision for 2023.

The Australian Bureau of Statistics will release the next round of job statistics this coming Thursday, followed by September’s quarterly CPI figures on October 25.

Two sets of data from the ABS to be released in coming weeks will weigh heavily on any decision the RBA makes at their November meeting. Picture: NCA NewsWire / Nicholas Eagar

Ahead of that information, three of the big four banks predict the RBA will keep the official cash rate on hold at 4.10 per cent, with only NAB’s economic team forecasting a 0.25 per cent hike.

Comparison website RateCity.com.au has compiled modelling showing an increase to 4.35 per cent would cause the average borrower with a $500,000 mortgage taken out at the start of the current spate of hikes would have to pay an extra $76 a month in repayments.

That means their repayments since the RBA started raising the cash rate would have increased by $1210, or 52 per cent, since May 2022.

The same modelling shows the same borrower having taken out a $750,000 mortgage would have to fork out an extra $114 a month with a November rise (or $1815 over 13 hikes), and if they’d taken out $1m they’d be paying an extra $152 a month (or $2420 over 13 hikes).

A rate hike in November would mean someone who took out a $500,000 mortgage before May 2022 will have to fork out an extra $76 a month in repayments. . Picture: NCA Newswire Gaye Gerard

RateCity research director Sally Tindall said the minutes of the RBA’s October meeting show the November cash rate decision will be at the mercy of the incoming data.

“It’s crunch time for the RBA. Its ‘wait and see’ approach has served it well for the last four months, giving it time to better assess the impact the previous 12 hikes have had on households and the economy,” Ms Tindall said.

“While the board is likely to want to give the current monetary policy settings more time to filter through the economy, sluggish inflation figures could force it to fire off a 13th hike, potentially as early as the next meeting.

“If inflation starts looking like it will take longer than expected to return back into the target band of 2 to 3 per cent, the RBA has made it clear: it will act.”

New Reserve Bank governor Michelle Bullock arrives at the RBA in Sydney for the October rates decision. Photo by: NCA Newswire / Gaye Gerard

She said mortgage holders should plan for a hike by paying the extra money now.

“The next RBA meeting is in three weeks, if your budget is bordering on red, spend this time to find ways to inject more relief into your finances,” Ms Tindall said.

“Whether that’s haggling with your current bank for a rate cut, refinancing your mortgage to a lower rate lender, or overhauling other big expenses such as insurances and your energy bill.

“A small win on one bill might feel like a drop in the ocean, but if you repeat the process across all of your regular expenses it can start to add up.”

The RBA holds its next rates decision meeting on Tuesday November 7.