More jobs could mean higher rates

Better than expected jobs data released yesterday has raised speculation of more interest rate hikes to come this year. Australia's economy added 45,900 jobs in June, much more than the 15,000 that was expected by the market.

"These numbers will certainly concern the RBA," said Helen Kevans, an economist at JPMorgan. "Further evidence of building wage pressure will add to an already worrisome inflation outlook, with headline inflation likely to remain above the RBA's 2 to 3 per cent target range this year and next," she said.

Rates futures market trading indicates a 32 per cent chance of rates rising to 4.75 per cent by November, from 4.5 per cent now. The Australian dollar rose strongly yesterday after the data was released.

Source: Sydney Morning Herald