A distinguished economist has warned Wednesday’s rise in inflation would possible see the Reserve Bank of Australia carry its money price on February 7.
Increasing for the fourth consecutive quarter, the Consumer Price Index (CPI) noticed a year-on-year enhance of seven.8 per cent, the best annual enhance since 1990.
Chief Economist for Betashares, David Bassanese mentioned Wednesday’s “larger-than-expected gain” would possible drive Governor of the RBA, Philip Lowe to extend the official rate of interest by 0.25 per cent. This would deliver the money price to an 11-year excessive of three.35 per cent.
Mr Bassanese believed the rate of interest will enhance by one other 25 foundation factors in March, earlier than issues eased.
“Thereafter, there is a good chance the RBA could begin to reverse these rates hikes in the second half of the year, if growth does slow and inflation eases as widely expected,” he mentioned.
“Especially if the United States economy tumbles into recession.”
If confirmed appropriate, February will mark the RBA’s ninth consecutive price rise, because the RBA makes an attempt to decrease the CPI to a goal vary of two to three per cent.
“Presentationally, it will be hard for the RBA not to lift interest rates again against the backdrop of the highest underlying (trimmed-mean) annual inflation rate in 34 years,” mentioned Mr Bassanese.
Australia’s Cash Rate 2022
Economists from NAB additionally forecast the RBA money price to hit 3.6 per cent by March 2023, the place it would stay steady earlier than dropping to three.1 per cent in March 2024.
Westpac and ANZ imagine the official rate of interest will peak at 3.85 per cent in May 2023, whereas CBA analysts imagine the money price will hit 3.35 per cent in February 2023.
Speaking to reporters on Wednesday, Treasurer Jim Chalmers mentioned the CPI was “unacceptably high,” and reiterated inflation as a “defining challenge” for 2023.
“This is very high inflation by historical standards,” he mentioned.
“There’s no use pretending otherwise.”
While he mentioned inflation had possible “peaked”, he warned households that prime costs would love stay for “longer than we’d like”.
“We are realistic about the extreme price pressures that Australians are facing right now, the impact of interest rates hikes, and the costs and consequences of a war in Europe and a period of substantial volatility in the global economy as well,” he mentioned.
