Inflation concerns prompt anticipation of Q4 interest rate hike

MARKET_WATCH Economy

Consumer electronics and appliance retailers, including Apple (NASDAQ:AAPL) stores, JB Hi Fi, The Good Guys, Optus, and Telstra (OTC:TLGPY), are preparing for a challenging Q4 2023 amid expectations of an interest rate hike by the Reserve Bank. This comes in response to a 1.2% inflation rise, largely due to increasing fuel and electricity costs along with a 2.2% increase in rents, as reported by the Australian Bureau of Statistics (ABS).

 

The ABS has also revealed that consumer price growth has slowed from 6% in June to 5.4% in September. However, economists had projected a quarterly consumer price index lift of 1.1% and an annual increase of 5.3%, suggesting that the latest consumer price report could trigger a rate hike on Melbourne Cup day.

 

RBA governor Michele Bullock confirmed readiness to raise the cash rate for inflation control, aligning with Treasurer Jim Chalmers' statement that these figures match Treasury's inflation forecasts. Government measures such as the cheaper childcare plan were highlighted as effective in easing price pressures by both Chalmers and Shadow treasurer Angus Taylor, who emphasized a need for a long-term fiscal balance focus.

 

ABS's Michelle Marquardt identified offsetting price drops in sectors like childcare and domestic travel despite the overall inflation rise driven by escalating petrol, rent, electricity costs, higher oil prices, and a depreciating Australian dollar.

 

Economists like EY's Cherelle Murphy and banks such as Commonwealth Bank, ANZ, and AMP (OTC:AMLTF) predict a 25 basis point cash rate hike on Melbourne Cup Day due to these inflation figures.

 

Despite the challenging economic environment, retailers are experiencing significant demand for the new iPhone 15 model, which has led to widespread stock shortages. Retailers are banking on Black Friday sales to enhance pre-holiday revenues.

 

Treasury secretary Steven Kennedy cautioned that rising petrol costs could delay the return of inflation to the Reserve Bank's target range of 2-3%. He also warned that an escalating Middle East conflict could lead to a global oil price surge, potentially accelerating inflation and negatively affecting global growth.

 

Source : Investing.com / October 25, 2023

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