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House pricesHSBC’s chief economist says he expects the central bank to leave interest rates on hold until mid-year, even though inflation is showing signs of picking up.

Paul Bloxham, a former Reserve Bank economist, said last week’s CPI numbers were “the beginning of the upswing in inflation.”

“I think it is the beginning of a sequence of inflation numbers that will start to look stronger than the previous set,” he told ABC’s Inside Business program on Sunday.

The Australian Bureau of Statistics (ABS) surprised economists last Wednesday, after it reported that the Consumer Price Index (CPI) had risen by 1.6 per cent in the March quarter for an annual inflation rate of 3.3 per cent.

“It will start to be a concern for the RBA, they will start to then be thinking about having to lift rates, particularly given that it was underlying inflation that picked up,” Mr Bloxham said.

Mr Bloxham said HSBC expects borrowers to be spared an interest rate rise on Tuesday, despite the signs of rising inflation.

“We expect that the next rate rise will be in July or August and that we’ll get another 50 basis points this year, by the end of this year,” he said.

Over the coming year, Mr Bloxham said he expected the cash rate to rise 100 basis points.

Of 13 economists surveyed by AAP, 11 expected the central bank to make its first rate hike in the third quarter of the year.

Story source: http://finance.ninemsn.com.au

Tags: economy, finance, interest rates, property

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