Why the RBA is predicted to deliver a third straight interest rate hike this week

One economist is calling it the “Hormuz hike”. There’s a nearly 80% chance that the Reserve Bank will deliver a third straight interest rate rise on Tuesday, according to financial markets. Higher interest rates are always unwelcome for the roughly 3.6m households paying down a mortgage. But a rate rise this week would be particularly galling. Slammed with higher petrol prices and the broader cost-of-living grind, more than one homeowner will be wondering how paying more interest on their loans will do anything to fix the root cause of the latest inflationary pulse: the Middle East conflict. Official figures released last week showed inflation jumped by almost a percentage point to 4.6% in the year to March and the highest in two and a half years. But the more than 30% spike in petrol prices in the month accounted for most of the month’s inflationary uplift, the data showed. Phil O’Donaghoe, the chief economist at Deutsche Bank, understands mortgage holders’ frustration. “The irony is that there is absolutely nothing that monetary policy can do about inflation in the next six months: it’s all the oil price,” he says. But O’Donaghoe, like most economists, still reckons a rate hike is the right thing to do. Why? Because the RBA needs to send a message: “We are going to get inflation back under control”. …