Reserve Bank Governor Philip Lowe has issued a grim update on Australia’s battle with rampant inflation, after the RBA lifted rates for a tenth consecutive time to 3.6 per cent on Tuesday.
The expected 25 basis rise was confirmed after the Reserve Bank board met on Tuesday afternoon, with the cash rate at its highest since June 2012.
Mr Lowe flagged more “tightening of monetary policy will be needed” to bring inflation down to the goal range of 2 to 3 per cent – and revealed when that might first be achieved.
The RBA said last month that inflation, standing at 7.8 per cent, had most likely peaked during the fourth quarter of 2022, but that domestic cost pressures were still strengthening. As a result, after today’s rise, they’re likely to have one more increase in April, but then keep it steady, Gerard Aird (CBA Head of Australian Economics) forecasts.
A Domain article Aird says, “I think the RBA are underestimating how the consumer is going to respond to rate hikes and the significant change to their cash flow,” said Aird. “The economy is showing signs of softening quicker than they anticipated and they’ve got to avoid a hard landing.
“So, I’m predicting one more rate rise in April to peak at 3.85 per cent, and then a pause, and our thinking is that in November and December the RBA will have a couple of rate cuts of 25 basis points each.”
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