The RBA has again increased the interest rate by 25 basis points up to 3.10 per cent. This is the eighth consecutive rate rise since May this year.
Professor Mark Gelatos from the University of Sydney said inflation is still significantly above the RBA’s target band and likely to increase further, notwithstanding declining oil prices and an increasing risk of global recession.
“Like most central banks, the RBA was slow to recognise the inflation threat and its policy settings need to catch up to the inflation reality,” said Mr Gelatos.
“Moreover, the RBA’s hand is likely to be forced by increasingly aggressive tightening actions by other central banks. This means the cash rate will likely need to be raised steadily in the near future with a likely pause early 2023 as the RBA assesses the impact of its tightening strategy.”
AMP chief economist Shane Oliver also agreed that high inflation, strong jobs, wages data and the absence of a RBA meeting in January had driven the hike in interest rates this month.
Mr Oliver said there could be a further hike in February up to 3.35 per cent.
“[However], by the end of 2023 we expect weak growth and a sharp fall in inflation to drive the start of rate cuts,” said Mr Oliver.
KPMG partner and senior economist Sarah Hunter said the rate hike this month was to be expected given the data continues to indicate that “inflationary pressures are not contained”.
“The RBA has flagged that further rate rises are needed. Equally, there hasn’t been any major surprises in the data recently.”
