The Reserve Bank of Australia (RBA) could hike interest rates as early as next month, NAB chief economist Alan Oster has said.
According to Mr Oster, NAB was forced to review its economic forecast after the RBA hinted that another rate hike was likely to occur this year.
While NAB has left its medium term interest rates forecast unchanged, expecting the cash rate to reach 5.5 per cent by the end of 2011, the bank has brought forward the timing of the next 25 basis point rate rise from early 2011 to next month.
Mr Oster said the combination of the stronger than expected June Quarter National Accounts, continued improvement in the Australian labour market and some calming in international financial markets has induced the RBA to prepare the market for a policy tightening in October.
“Until recently, Reserve Bank officials seemed to be signalling that interest rates were around average and growth was close to trend. There are now enough straws in the wind for us to believe that the tightening phase may well begin sooner rather than later and probably before the release of the next CPI reading in late October,” he said.
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