The RBA likely believes it won’t need to hike rates again – but the worst thing it could do is say that out loud
When it comes to the Reserve Bank, there’s a whiff of a parent making a threat they have no intention of carrying out Get our breaking news email , free app or daily news podcast Every parent makes threats in an effort to get their kids to behave – and every parent hopes they won’t have to follow through. Some (most?) parents even make threats they have zero intention of carrying out. Continue…
The Reserve Bank of Australia (RBA) decided to keep interest rates at 4.35% on Tuesday, a move that was expected by many. The last time the RBA hiked rates was in May, roughly three months prior. Since then, the central bank's forecasts have indicated that inflation should return to around their 2.5% target within a year. The impact of conflicts in the Middle East and high fuel prices has not been as inflationary as initially thought, although the lingering effects of the global oil shock could take 1-2 years to fully manifest.
The RBA board also noted that "the economy appears to be slowing as expected," and the housing market downturn is working against the need for another rate hike. However, Michele Bullock, the deputy governor, did not convey this during her press conference, stating that "inflation remains too high, and the board remains concerned about the upside risks."
She also expressed her personal belief that "it's quite possible we might need to go," referring to potential further rate hikes. Despite inflation being lower than anticipated and unemployment slightly higher, Bullock emphasized the RBA's readiness to hike rates again if necessary. This could be due to the desire to project a strong image and the significant impact of such "jawboning" on financial markets.
Written by urgent.news from The Guardian Australia's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
