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Australia's central bank may raise the benchmark interest rate in the first quarter of 2008 to quell inflation, economists say.
Governor Glenn Stevens and his board will increase the overnight cash rate target by a quarter-point to 7 per cent, according to 15 of 25 economists surveyed by Bloomberg News.
Policy makers meet to decide on rates on February 5 and again on March 4.
Surging fuel costs, home rents and wages as the economy enters its 17th straight year of expansion have stoked speculation that Stevens will add to last year's two rate increases. Ten economists forecast the central bank will keep borrowing costs unchanged in the first quarter to gauge fallout from the US housing recession and stock-market declines.
"Inflationary pressures are continuing to mount, placing further pressure on the Reserve Bank to lift interest rates in February," said Craig James, chief equities economist at Commonwealth Bank of Australia in Sydney.
"Every economic reading released on 2008 has been super strong. The US economy may be teetering on the precipice, but the Australian economy is still climbing mountains."
Reserve Bank of Australia policy makers decided against raising borrowing costs last month because the global credit rout had already increased the cost of lending, according to minutes of the December 4 policy meeting.
The bank's weighted-median inflation measure climbed 3.1 per cent in third quarter from a year earlier. Fourth-quarter figures will be released on January 23.
- BLOOMBERG
