Rising Inflation Pushes RBA to Consider Interest Rate Hikes in February
Rising Inflation Pushes RBA to Consider Interest Rate Hikes in February
The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.
The Australian economy is facing a likely increase in interest rates in February, as inflation hits its highest rate in 33 years.
The latest Consumer Price Index figures show that inflation reached 7.8% in 2022, with a 1.9% increase in the December quarter alone.
This increase in inflation is largely attributed to a post-pandemic spend-a-thon, with domestic holiday travel and accommodation rising 13.3% and international holiday travel and accommodation rising 7.6%.
Additionally, rents increased by 4% and power bills by 8.6%.
Measures of underlying inflation, such as the trimmed-mean inflation rate and the weighted median price, also came in at record highs. These statistics indicate that prices are increasing rapidly across the Australian economy.
The Reserve Bank of Australia (RBA) is expected to increase interest rates by 0.25 percentage points at its next meeting on February 7th and likely several more times throughout 2023 in order to fulfill its mandate of keeping inflation between 2% and 3%. Higher interest rates will encourage households to spend less and save more, and will also make the dollar more valuable. This will help to make imports cheaper and will also lead to higher loan repayments for households with a mortgage.
While economists expect inflation to have peaked, the pace at which it will then fall is still uncertain. If rents continue to rise or wage growth picks up, it's possible that the CPI will continue to rise, resulting in the RBA lifting rates. However, if the rate of inflation starts to fall more quickly towards the 2-3% target band, the RBA may not need to increase interest rates as much.
Overall, there remains a high degree of uncertainty in the outlook of the Australian economy. Policymakers will need to remain flexible when setting macroeconomic policy and be ready to adjust interest rates as the economy changes.
Published:Friday, 27th Jan 2023 Source: Paige Estritori
Please Note: If this information affects you, seek advice from a licensed professional.
In a significant development for the Australian banking sector, ANZ has successfully completed its $4.9 billion acquisition of Suncorp Bank. This strategic move, finalised on 31 July 2024, marks a pivotal expansion for ANZ, enhancing its service offerings and market reach across the nation. - read more
The Australian mortgage market is witnessing a notable shift as non-bank lenders increasingly capture a larger share, challenging the dominance of traditional banking institutions. This trend is driven by digital innovation and evolving consumer preferences, leading to a more competitive landscape in home financing. - read more
In its latest monetary policy decision, the Reserve Bank of Australia (RBA) has opted to keep the official cash rate unchanged at 3.60%. This decision reflects the central bank's cautious approach in navigating the current economic landscape, balancing the need to control inflation with the goal of sustaining economic growth. - read more
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you!
In the dynamic world of Australian finance, securing a loan can be a pivotal move for individuals seeking to achieve their financial goals. Whether it's for purchasing a dream home, expanding a business, or simply consolidating debt, the importance of smart loan comparison cannot be overstated. With an array of lending products available, borrowers are often faced with a bewildering choice. That's why equipping yourself with powerful loan comparison strategies is not just important, it's essential. - read more
A credit rating is essentially a numerical representation of your financial trustworthiness. It's like a report card for your creditworthiness, where higher scores indicate better financial habits. Lenders and financial institutions scrutinize this score when you apply for credit, serving as a primary factor in approving or denying loan applications. - read more
Welcome to the world of car ownership! If you're a first-time borrower in Australia, you're likely to feel a mix of excitement and apprehension. Acquiring a car loan is a significant financial responsibility, and navigating through the options can be daunting. This introductory guide is designed to set you on the right path to making a well-informed decision. - read more
Knowledgebase
Interest-Only Loan: A type of loan where the borrower only pays the interest on the principal balance for a set term.
