WEEKEND ECONOMIST: The next hike

Following this week's surprise rate hike and extraordinary jobs data, another increase in official rates is likely in November. But a December hike is unlikely as no RBA board has ever lifted rates three months in a row.

Following the RBA's announcement, markets quickly moved to price in a probability of around 60 per cent for a November move and 150 per cent for a December rise. Following Thursday's labour market data showing an extraordinary increase in employment in September of 40,600 (versus consensus of a 10,000 fall) markets are now giving a 110 per cent probability of a 25 basis point rate hike in November and 200 per cent for December – the market now sees hikes in both November and December as certainties. There is even some speculation that rates will be increased by 50 basis points in November, although this prospect is currently being given little chance by the market.

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