May 5th 2024.
Today and tomorrow, the Reserve Bank of Australia will be convening to determine interest rates, amidst concerns that the fight against inflation is far from over. While it is unlikely that there will be a rate hike at the conclusion of the meeting, recent data showing higher-than-expected inflation in the past quarter suggests that we cannot completely dismiss the possibility of rate increases later in the year.
Former governor of the central bank, Philip Lowe, has expressed caution for those with mortgages, stating that the battle against inflation is not yet won. In an interview with The Australian Financial Review, he said, "I understand that most people are hopeful that we have reached the peak, but we cannot be certain. I have been reminding people throughout the year that there is still a possibility of both rate increases and decreases."
Lowe also mentioned that just two months ago, both markets and economists were predicting a decrease in interest rates. However, he advised them to hold on, as there was still a chance of rates going either way. He emphasized that the goal of bringing inflation back to the target of 2.5% is not yet guaranteed, and there is still a possibility of unexpected increases that could lead to a case for rate hikes.
In the past 12 months, the consumer price index has risen by 3.6%, which is higher than the RBA's forecast of 3.5%. This figure also surpasses the central bank's target of 2.5%, which they are aiming to achieve by 2026. Another former RBA governor, Glenn Stevens, stated last Friday that "low inflation is not yet assured, and the future of interest rates remains uncertain."
During its last meeting in March, the RBA did not consider lowering interest rates, nor did they propose an increase. Governor Michele Bullock has not given any clear indication of when rates may start easing, stating that the bank is not ruling anything in or out. These uncertainties highlight the importance of closely monitoring inflation and making informed decisions regarding interest rates.
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