Interest Rates in Australia : All you need to know
On Tuesday, the Reserve Bank of Australia (RBA) increased interest ratesv to a 10-year high and maintained its forecast that more rises are necessary to reduce inflation. This posture was seen as somewhat hawkish by markets expecting signals of a halt in the near future.
With its last policy meeting of the year in the books, the Reserve Bank of Australia (RBA) increased its cash rate by 25 basis points to 3.1%, marking the eighth rise in as many months and the largest single increase in rates (300 basis points) since May.
After a series of half-point rises, all 30 economists surveyed by Reuters predicted the RBA would opt for another tiny 25 basis point boost.
A statement from Governor Philip Lowe echoes similar ones from the last several months: the board plans to raise interest rates further in the time ahead, while it is not on a predetermined track.
Incoming data and the Board’s assessment of the outlook for inflation and the labor market will continue to influence “the magnitude and timing of future interest rate hikes,” Lowe said.
CBA’s head of Australian economics Gareth Aird had previously predicted that rate rises would cease after December, but he has now revised his projection to include a further rise of 25 basis points in February, bringing rates to a high of 3.35%.
“As was to be anticipated, the Board’s leaning remains more restrictive. However, the Governor did not make the expected adjustments to the pivotal passage about forward guidance “what Aird had to say.
The Federal Reserve will have until its next policy meeting in February to evaluate the results of its most aggressive tightening cycle in decades.
Inflation for consumers is estimated to have been about 8% in the fourth quarter compared to the same period a year earlier, according to projections from the central bank that will be included in the quarterly inflation report coming in January.
The local currency continued its ascent after the policy decision was made public, reaching a day high of $0.6737.
Expectations for when interest rates will peak have been driven upward by the market from 3.5% to 3.6% by July of next year.
Although ANZ has predicted a final rate of 3.85%, the bank recognizes that future decisions will be data-dependent on a month-to-month basis.
“If the statistics warrant it, the RBA will hold off on further rate hikes, albeit this pause will have to convince markets. A sharp drop in local consumer spending or a continuation of the worldwide data slump might set off the alarm “David Plank, ANZ’s head of economics, warned this.
With a worldwide recession coming, the central bank had already suggested it intended to slow down and examine the consequences of the severe steps on consumer spending.
It has also indicated that it is prepared to resume greater hikes or put them on hold temporarily if necessary.
Indeed, the labor market continues to be tight, with the unemployment rate having tied a five-decade low in October at 3.4% and wage growth, which accele
rated in the third quarter at its quickest pace since 2013 and is likely to continue doing so in the months ahead.
Although the newly published data series does not include electricity prices, there are hints the rate rises may have already started to dampen the economy, with the monthly consumer inflation rate dropping in October.
Furthermore, the rate rises already implemented will increase the average mortgage payment by about A$1,000 a month, which is a dead weight for a population that has A$2 trillion ($1.3 trillion) in house loans.
Although the rate of decrease has begun to slow, Australian home values declined for the seventh consecutive month in November, putting a damper on family wealth and dampening consumer confidence and spending in the coming months.
Read More :
which language australia speaks? (estimated 8,000 speakers)
