Likely Fed hike opens door for RBA rate rises

Adam Smith 6 March 2017 NEWS

percent stock board1A future RBA rate hike just became more likely after new commentary from the US Federal Reserve.

US Fed Chair Janet Yellen has tipped the possibility of a hike to the Federal Funds Rate when the Fed meets on March 14 and 15. Yellen told a business luncheon in Chicago on Friday that a rate rise “would likely be appropriate” should inflation and employment figures meet the Fed’s expectations.

The likelihood of a rise to the US Federal Funds Rate could push the RBA to lift the official cash rate over the next year. UBS chief economist Scott Haslem told The Australian that a move by the US Fed could make the RBA “feel compelled” to hike rates, even if inflation remained below 2%.

“It is possible there is some internal angst at the RBA about the re-acceleration in housing borrowing by investors, and the risk that rates are just set too low,” Haslem said.

Haslem’s sentiments echo those of experts polled in finder.com.au’s monthly RBA cash rate survey. Sixty-eight per cent of panelists surveyed predicted the RBA’s next move would be a rate rise. While a further 68% predicted the RBA to leave the cash rate on hold until 2018, others tipped May, July or between August and November as likely times for the RBA to move.

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