Unpopular RBA move risks hitting wrong target

ANALYSIS Struggling mortgage holders are staring down the real possibility that another interest rate hike – widely expected to come later this month – may bring more pain while delivering little additional progress on inflation. The Reserve Bank has pointed to stubborn inflation as the reason for its run of rate increases, but there is a growing debate about how much extra impact further tightening would have on household spending from here. Markets have tipped a 76 per cent chance of a rate hike in September, according to the latest ASX rates indicator. Were it to occur, it would be the fourth rise this year and would push the cash rate to a 15-year high. This year’s hikes have already put intense pressure on borrowers who bought homes at the high prices seen after the pandemic began in 2020, yet inflation remains above the RBA’s 2 to 3 per cent target range. The latest ABS figures showed underlying inflation over the year to July at 3.6 per cent, still well above the central bank’s target band. RBA governor Michele Bullock (right) is widely expected to announce another rate hike this month. Part of the challenge is that some of the strongest price pressures are in areas househol...