RBA points to potential rate rise

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Inflation figures, to be released at the end of the month, could trigger a mid-election rate rise.

Minutes from the Reserve Bank of Australia’s meeting earlier this month include a staff forecast of the June quarter inflation rate.

The minutes indicate that the RBA is expecting the inflation rate to be a little above 3%. However, the RBA is more concerned with the underlying rate of inflation, which it expects to be just under 3%.

The official cash rate currently sits at 4.5%. A rise of 25 basis points would add $48 a month to a $300,000 mortgage.

A mid-election rate rise is not unprecedented. The RBA pushed rates up in November 2007. The banks waited two months after the election to make their own changes to rates. This time however increased funding costs may force the banks to act sooner.

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