Economists expect three interest rate hikes by June 2011

By Mozo ·

There is broad agreement among leading economists that the Reserve Bank of Australia (RBA) will raise interest rates before the end of the year as well as into the first half of 2011.

The Australian's quarterly economic survey of 20 economists found that the consensus is for rates to be at 4.75 per cent by December, meaning one move by the RBA, possibly next month.

In addition, it was found that the median prediction is for at least three moves before June next year, which would take interest rates to 5.25 per cent.

Meanwhile, economists at Royal Bank of Scotland, AMP Capital and ICAP had higher estimates, forecasting that rates will hit 5.5 per cent by June, the Australian said.

ICAP senior economist Adam Carr suggested inflation will continue to play an important role in the RBA's interest rate decisions.

"Food inflation is going to continue to be a big problem," he said. "We have the situation where drought is not as much of an issue, but there are structural factors at play."

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