Can housing take another hike?

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September is shaping up as a huge month for interest rates. In the United States, Kevin Warsh is talking tough on inflation. While here at home, three of the big four banks now think the Reserve Bank could hike again too with some tipping arise as early as next month. So could borrowers here in Australia and in the United States both be slugged with higher rates? And what might this mean for a property sector, which was already groaning under the weight of three interest rate hikes, as customers, tradies and investors grapple with the multi-billion dollar fallout from big developer Bathla Group's collapse? Welcome to ABC Business Daily.
I'm Carrington Clarke.

**Michael Janda** (1:19)
And I'm ABC News Business Editor Michael Janda.

**Carrington Clarke** (1:21)
Michael, thanks for joining me. Last week, we did a bit of a preview of Jackson Hole, talked about the beautiful scenery.

**Michael Janda** (1:27)
The fly fishing.

**Carrington Clarke** (1:28)
Exactly. Why it is where it is. Kevin Warsh was having his big moments, stepping into that spotlight. Up until now, it seemed like maybe he's a little bit uncomfortable with how much spotlight might be on him because it might put him into an awkward position when it comes to telling us whether or not the Reserve Bank over there, the central bank, I should say, the Federal Reserve, whether or not it would be forced to hike rate soon, because we know that is the one thing Donald Trump does not want the Federal Reserve to do, particularly right now, because we have these crucial midterm elections coming up. This could mean the Democrats taking back control of the Congress. He's put a lot of pressure on the predecessor of Kevin Warsh, Jerome Powell. But Kevin Warsh was at least talking tough, wasn't he, when it came to the fight against inflation?

**Michael Janda** (2:11)
Well, we know Donald Trump spent most of last year talking down to Jerome Powell for his inflation fighting rhetoric and scouring the United States for a successor to Jerome Powell that would lower interest rates. And if he thought he'd found that person in Kevin Warsh, just like remember it was Donald Trump in his first term who appointed Jerome Powell as Fed chair in the first place, it seems like again, he's appointed someone who while on the face of it, he thought might lean towards lower interest rates. As he said, at least in terms of talk, Kevin Warsh is talking tough saying that inflation is stubborn and that the Federal Reserve needs to be confident that underlying inflation is moving towards its 2% objective at sufficient speed.
Otherwise we have work to do. And the work that he's referring to there can only be interest rate rises if he's not satisfied that inflation is going to get back to 2%.

**Carrington Clarke** (3:16)
Yes, I mean, you say that Donald Trump was looking around for somebody who might be on the same page as him when it comes to being, as Donald Trump calls himself, a low interest rate guy. But Kevin Warsh wasn't too hard to find given he is the son-in-law of one of Donald Trump's oldest friends. But putting that to a side, Donald Trump likes to pick from those people pretty close to him. This is an awkward position for Kevin Warsh to be in because he does have this kind of personal relationship through his father-in-law with Donald Trump. That would have been part of the reason he came to his attention. I mean, Kevin Warsh also has a record already on the Federal Reserve before this.
Kevin Warsh has scrapped forward guidance for the Federal Reserve. He doesn't want the market to know exactly what the Federal Reserve is thinking. But you can't get away with trying to completely shield the markets from knowing what's going on. And they were looking for some sort of guidance. And as you say, he was talking tough.
He was basically telling the market, I think, what the market kind of wanted to hear. There is concern that the Federal Reserve might have become politicised and wouldn't prioritise dealing with inflation.

**Michael Janda** (4:27)
You've got a situation where he's damned if he did and damned if he didn't, because if he was seen as dovish and talking down the prospects of a rate hike and that inflation wasn't a big concern because we've got this great AI boom and it's going to boost productivity and lower prices. If that was the tenor of his speech at Jackson Hole, then the market probably would have pushed short-term interest rates down, but long-term interest rates, the 10 and 30 years that have been really surging in recent weeks, would have gone through the roof because markets would have lost confidence that the Fed is serious about keeping inflation to 2 percent over the long term. So what he's done here has had the effect of pulling back rate expectations on the longer term because people are saying, okay, maybe like Jerome Powell, even though he's a Trump appointee, Kevin Warsh on the face of it appears credible about keeping inflation contained. But the trade-off for that is now bets of a Fed rate hike in September, next month, have gone above 60 percent.