HSBC 'calls for 100 basis points hike in interest rates by mid-2012'

The Reserve Bank of Australia's (RBA's) board is expected to keep interest rates at 4.75 per cent when they meet tomorrow (July 5th 2011), but an HSBC economist has said that by this time next year there may be a one per cent rise.

Paul Bloxham told the Australian that statements by the RBA suggest that a hike of at least 50 basis points will be needed to contain inflation over the coming 12 to 18 months.

However, he suggested that the current soft patch in the economy is "largely temporary" and added that overall he expects to see an improvement.

"We think the next hike will be August and are still calling for 100 basis points by mid-2012," he said.

The last occasion on which the base rate was increased was in November 2010, when the RBA pushed rates up by 25 basis points to their current level.

Despite aiming for a one percentage point raise by mid-2012, Mr Bloxham added that the process "may be more elongated".

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