Aggressive tightening pressure in Australia

The Reserve Bank of Australia’s aggressive monetary tightening is raising the risk of an economic slowdown, experts said. Australia is on track for its sharpest monetary policy tightening to date. That increases the risk of an economic slowdown as the housing market turns bearish and consumers pull back on spending. The Reserve Bank of Australia will raise interest rates by 50 basis points to 1.85% for a third month in a row on Tuesday, according to 28 of 30 economists in the survey. That would take the combined tightening since May to 175 basis points and is expected to be the biggest six-month increase since 1994. “The RBA is behind the pack. At a 6% annual pace,” said Andrew Ticehurst, senior economist at Nomura Holdings. “With the cash rate at 3.35% by the end of the year, money markets are pricing in around 3%. Such a sharp pace of tightening would accelerate repayments and put pressure on consumption, which accounts for around 60% of economic output,” he added.