Another huge interest rate hike is on the cards – and one of the main reasons is beyond Australia’s control.

Some economists, anticipating the Reserve Bank’s October cash rate decision, revised their forecasts upward amid a global economic slowdown.

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Global stock markets tumble amid fears of a recession in the US, UK and Europe.

A global energy and inflation crisis, triggered mainly by Russia’s invasion of Ukraine, has reduced growth much more than expected, the Organization for Economic Co-operation and Development (OECD) said. .

The global economic slowdown could cause Australia’s inflation rate to rise, prompting the RBA to raise rates again.

The OECD predicts real GDP growth of 4.1% in 2022, down from its June forecast.

Core inflation in Australia is also expected to reach 5.4% in 2022 before falling to 4.3% in 2023.

This is far from the RBA’s inflation target of between 2 and 3%.

“The effects of war and the continued impacts of COVID-19 outbreaks in some parts of the world have dampened growth and put additional upward pressure on prices, especially for energy and food,” the report said. OECD economic outlook report.

The US Federal Reserve aggressively raised the interest rate last month to counter its own inflation problem.

He increased the cash rate by 75 basis points.

The World Bank said in a statement that central banks were moving “with a degree of synchronicity not seen in the past five decades.”

“Still, the currently expected path of interest rate hikes and other policy measures may not be sufficient to bring global inflation back to pre-pandemic levels,” he said.

In recent months, almost all central banks have raised rates, with China, Japan and Russia being among the few exceptions.

Three of Australia’s four big banks are forecasting a 50 basis point rise in the exchange rate on Tuesday.

The outlier, the Commonwealth Bank of Australia, forecasts a 25 basis point increase.

Further increases in the cash rate will likely only add pain to borrowers.

Going into 2022, the cash rate remained at a record high of 0.1%, set during the pandemic.

RBA Governor Philip Lowe previously hinted that the cash rate would not be raised until 2024.

But, since May, the cash rate has been increased for five consecutive months. Four of those five increases were 0.5%.

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The number behind the increases is inflation, Lowe said.

“Inflation is expected to peak later this year and then ease back down to the 2-3% range,” he said in a statement explaining the September decision.

“The expected moderation in inflation reflects the ongoing resolution of global supply issues, recent declines in some commodity prices and the impact of rising interest rates.

“Medium-term inflation expectations remain well anchored, and it is important that this remains the case. According to the Bank’s central forecast, CPI inflation will be around 7.75% in 2022, slightly above 4% in 2023 and around 3% in 2024.”

Ultimately, the RBA adjusts rates to bring inflation in line with its 2-3% target.

On Thursday, the Australian Bureau of Statistics revealed that inflation had reached 6.8% over the past 12 months.

This figure was largely due to construction and fuel prices.

Statistician Dr David Gruen AO said a slight drop from the 7.0% reported in August was due to lower petrol prices.

“The largest contributors, in the 12 months to August, were new home construction, up 20.7% and motor fuel, up 15.0%,” he said. declared.

“The slight drop in the annual inflation rate from July to August is mainly due to a drop in automobile fuel prices.

“This saw the annual movement of automotive fuel fall from 43.3% in June to 15.0% in August.”

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