Interest rates: Reserve Bank could raise rates further which would further increase mortgage pressure for Australians

Australians already struggling with cost-of-living pressures could see three more rate hikes this year as global inflation concerns mount.

The Reserve Bank of Australia paused rate hikes for the second time this year on Tuesday, leaving cash rates at an 11-year high of 4.1 percent after July’s board meeting.

Since May last year, interest rates have risen at their fastest pace since 1989, with 12 increases in 13 months.

Just three days later, the carnage in global bond markets has fueled speculation that the RBA will follow the US Federal Reserve’s efforts to curb inflation by further raising rates.

On Friday, fresh evidence of the strength of the US labor market emerged, leading investors to predict further monetary policy tightening while triggering a rapid sell-off in equities and pressure on the Australian dollar.

Aussie shares plunged 1.7 percent on Friday to a three-month low of 7042.3 points.

Australian interest rates have not always followed the US, but AMP chief economist Shane Oliver said similarities between the two economies would force the RBA to react to moves in other markets.

Markets still only have a 50 percent chance of an August rate hike, but two rate hikes are now priced in by the end of the year. Australian Financial Review.

Vimal Gor, chief investment officer at Sydney-based asset manager Trovio, said: “Central banks, including the RBA, don’t want to raise rates, but they could be forced to.”

The RBA is expected to raise official interest rates three more times before the end of the year

There is speculation that the Australian dollar could fall further as investors shift capital to higher-yielding currencies such as the US dollar.

A weakened Australian dollar could increase the cost of imported goods such as petrol, machinery and building materials.

This would force the RBA to continue its most aggressive monetary tightening cycle since the late 1980s.

Reserve Bank of Australia Governor Philip Lowe, whose seven-year term expires on Sept. 17, hinted that Tuesday’s pause was likely to be only temporary.

“Inflation in Australia has peaked and the monthly CPI indicator for May showed a further decline,” he said Tuesday.

“Some further monetary policy tightening may be needed to ensure that inflation returns to target within a reasonable time frame, but that will depend on how the economy and inflation evolve.”

Finance guru Mark Bouris has warned that Australians struggling with interest rate hikes and rising cost-of-living pressures could be forced to sell their homes.

Mr Bouris, head of Yellow Brick Road Home Loans, said that while property prices will not continue to rise, housing supply will, especially as people begin to feel the effects of rising interest rates.

“People are hanging around to see whether or not this rhetoric that we’re hearing right now, ‘oh house prices are going up’, will sell,” Bouris told Sky News Australia.

“If they don’t see that period, they’ll have to sell and they’ll sell to a large supply market.”