The RBA is widely expected to lift the official cash rate 25 basis points when it meets next Tuesday.
According to HSBC economist Paul Bloxham, the Australian economy is now back to growing at around trend, with business surveys suggesting it is operating at near capacity.
“In addition, the unemployment rate has fallen to around 5.1 per cent, which is close to most estimates of the natural rate,” Mr Bloxham said.
With this in mind, Mr Bloxham said it is likely we will see inflation increase, which would force the Board to lift rates on November 2.
“Our central forecast is for an underlying inflation rate (average of trimmed mean and weighted median) of 0.8 per cent in Q3, which we think will be a key part of the motivation for a 25 basis point rate hike – taking the cash rate to 4.75 per cent,” he said.
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