SYDNEY - The Reserve Bank of Australia board meets today to decide whether to raise rates again for the sixth time in the present cycle.
And although economists see no pressing need for a tightening, they believe RBA might be inclined to raise rates by 25 basis points "as insurance."
The RBA last raised rates on August 2, by 25 basis points to 6.25 per cent. That move was the fourth rise this year and the fifth in the present tightening cycle.
"Our view is that the continuing deterioration in the inflation outlook will see the bank tighten a further 25bp before the end of the year, even though the growth outlook, predominantly internationally, is not as favourable as when the bank last tightened policy two months ago," Deutsche Bank chief economist Ivan Colhoun said.
He said the main issues included oil price developments and the present performance of the Australian dollar and what impact this would have on the inflation forecasts.
He said the RBA would consider whether inflation was rising close to its target of 2 to 3 per cent over the course of the cycle and how long it would stay there.
Mr Colhoun said that despite the fact that the pressures might all be "one-off" the combined threat to underlying inflation could not be ignored.
Australian rate decision today
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