For it’s first meeting of the new year, the RBA is to set the tone for 2023 by increasing interest rates again.
Yesterday’s December quarter inflation outcome of 7.8% saw inflation in Australia reach the highest level in 32 years. This virtually guarantees that the RBA will increase interest rates on 7 Feb 2023, by 0.25%
The RBA needs to remind us with an early 2023 rate increase that the inflation fight continues. They need to snap us out of Christmas holiday shopping/spending mode and back onto a demand constraint footing.
RBA – states – The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course. It is closely monitoring the global economy, household spending and wage and price-setting behaviour. The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.
When will the spending stop? Consumers continue to maintain their spending but do so by dipping into their savings. The savings ratio is now heading back towards pre-pandemic levels – at some stage soon, spending will slow.
Yesterday’s inflation result was not all bad as the quarterly inflation outcome fits into the narrative for the past 12 months (see below), that inflation seems to be flattening out—hopefully topping out.
- March 2022 + 2.14%
- June 2022 + 1.78%
- Sept 2022 + 1.82%
- Dec 2022 + 1.87%
The RBA cannot afford to give inflation any oxygen whatsoever and pause interest rate increases too early. The last thing the RBA wants is for the consumer to think the inflation fight is over and rev up their spending to post pandemic levels again.
In 2023 the RBA is going to be playing a game of inflation cat and mouse. They will have to be nimble and calibrate their interest rate settings and messages deftly. Key pieces of data that the RBA will watch carefully are wages growth, unemployment, retail sales and consumer and business sentiment etc.
Raising interest rates too far, pausing them too early and cutting too soon are all going to have economic and social consequences. Threading the needle and walking the tight rope for the RBA is going to be a really difficult balancing act to get right in 2023.
Let’s see how they go.
Rates up again?
For it’s first meeting of the new year, the RBA is to set the tone for 2023 by increasing interest rates again.
Yesterday’s December quarter inflation outcome of 7.8% saw inflation in Australia reach the highest level in 32 years. This virtually guarantees that the RBA will increase interest rates on 7 Feb 2023, by 0.25%
The RBA needs to remind us with an early 2023 rate increase that the inflation fight continues. They need to snap us out of Christmas holiday shopping/spending mode and back onto a demand constraint footing.
RBA – states – The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course. It is closely monitoring the global economy, household spending and wage and price-setting behaviour. The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.
When will the spending stop? Consumers continue to maintain their spending but do so by dipping into their savings. The savings ratio is now heading back towards pre-pandemic levels – at some stage soon, spending will slow.
Yesterday’s inflation result was not all bad as the quarterly inflation outcome fits into the narrative for the past 12 months (see below), that inflation seems to be flattening out—hopefully topping out.
The RBA cannot afford to give inflation any oxygen whatsoever and pause interest rate increases too early. The last thing the RBA wants is for the consumer to think the inflation fight is over and rev up their spending to post pandemic levels again.
In 2023 the RBA is going to be playing a game of inflation cat and mouse. They will have to be nimble and calibrate their interest rate settings and messages deftly. Key pieces of data that the RBA will watch carefully are wages growth, unemployment, retail sales and consumer and business sentiment etc.
Raising interest rates too far, pausing them too early and cutting too soon are all going to have economic and social consequences. Threading the needle and walking the tight rope for the RBA is going to be a really difficult balancing act to get right in 2023.
Let’s see how they go.
by Boris Sfiligoi
Share This
Categories
Finding a loan that best fits you, is what we do.
We choose to specialise in finding loans for teachers.