Fears are growing that the Reserve Bank will hit millions of mortgage holders with a fourth rate hike this year, after inflation eased in July but by far less than expected.<\/p>\n
Consumer prices climbed by 3.5% through the year, down from 3.8% in the previous month, according to the Australian Bureau of Statistics<\/a>.<\/p>\n That compared unfavourably to the forecast 3.3% annual rate predicted by economists leading into the result.<\/p>\n The Reserve Bank\u2019s preferred underlying inflation measure, which removes the most volatile prices, had been expected to moderate but instead was stuck at 3.6%.<\/p>\n Brendan Rynne, KPMG\u2019s chief economist, said \u201ctoday\u2019s data supports the view that without policy action we may be in for a long, costly grind to get inflation under control\u201d.<\/p>\n \u201cThe Reserve Bank may have missed an opportunity at the last board meeting to get ahead of the game by raising rates,\u201d Rynne said.<\/p>\n Annual rate of inflation. <\/a><\/p>\n The disappointing update comes a day after minutes from the most recent RBA meeting showed board members were unconvinced that they would be able to hit their 2.5% inflation target by the end of next year and would react to any evidence that price pressures were not easing as expected.<\/p>\n While the decision on 11 August to hold the cash rate<\/a> at 4.35% was unanimous, a number of board members thought another hike this year was \u201cquite possible\u201d.<\/p>\n Sign up for the Breaking News Australia email <\/a><\/p>\n Economists, many of whom had ruled out further rate increases, said the latest ABS figures heightened the chance of a November hike, with NAB analysts declaring that their call for no further rate hikes was \u201cunder review\u201d<\/a>.<\/p>\n Phil O\u2019Donaghoe, chief economist at Deutsche Bank, said he now expected the RBA would move as early as the next meeting in September, describing the underlying price growth as \u201cintolerably high\u201d.<\/p>\n \u201cWe think the July CPI [consumer price index] leaves little room for the RBA to do anything other than follow through on its hawkish posturing, and the earlier it does, the better,\u201d O\u2019Donaghoe said.<\/p>\n As expected, the end of the fuel excise relief in July helped push up pump prices by 7.5% in the month after falling for three months in a row, the ABS figures showed.<\/p>\n