In a probable preview of the RBA’s decision at the end of the month, overnight the Federal Reserve increased rates.
In a unanimous decision, the Fed decided that enough was enough, and ‘looking through’ supply driven inflation was no longer a viable strategy.
With fuel prices high and trending upwards, and no clear exit ramp for the middle east crisis, a move had to be made.
I expect the RBA will run similar calculus here. Inflation has been too high for too long, and the supply side issues aren’t easing. The only option left is to slow the economy with monetary tightening.
That means a rate rise in September, and I wager a further one in November, which will materially impact growth and put more pressure on business as we run into the Black Friday/Christmas peak shopping season.