Dark warning for mortgage holders as economists warn ANOTHER outsized rate hike is imminent
- Australian mortgage holders were aware that another rate hike was on the horizon
- Economists are upgrading forecasts ahead of the RBA’s interest rate decision in October
- The RBA will choose between a 25 or 50 basis point hike at its meeting next week
With worrying global economic conditions putting pressure on central banks to continue raising interest rates aggressively, another outsized rate hike looks more likely.
Some economists have revised upwards their forecasts ahead of the Reserve Bank of Australia’s interest rate decision in October.
The RBA said it would choose between a 25 or 50 basis point hike at its meeting next week, with the central bank citing the bleak global outlook and spending habits as two main sources of uncertainty that would guide its decision.
Economists have revised upwards their forecasts ahead of the Reserve Bank of Australia’s interest rate decision (pictured) in October
The RBA said it would choose between a 25 or 50 basis point hike at its meeting next week, with the central bank citing the bleak global outlook and spending habits as two main sources of uncertainty that would guide its decision
Royal Bank of Canada economist Su-Lin Ong says it will still be tight but is now leaning towards another 50 basis point hike.
She said central banks around the world remain hawkish as the new UK Chancellor’s “mini-budget” improves the chances of another big rate hike next month.
“As the Australian dollar continues to fall as global interest rate expectations are scaled back, fueling domestic inflationary pressures, the RBA remains under pressure to also deliver an outsized rate hike,” Ms Ong said.
But Ms Ong says the RBA’s “neutral rate” — the level that will neither boost nor deflate economic activity — is likely to be lower than its global counterparts as households are heavily indebted and many homeowners have adjustable-rate mortgages.
ANZ economists have stuck by their prediction that the RBA’s tightening cycle will end when it hits a neutral interest rate of 3.35 percent, but said there’s a good chance it will have to go higher.
“We expect the cash rate to rise to 3.35 percent by the end of the year, but there are growing risks that a higher cash rate will be needed to contain inflation,” economists at ANZ said
“The RBA appears poised to slow the pace of rate hikes, but global experience shows more needs to be done,” economists at ANZ said.
‘We expect the cash rate to rise to 3.35 percent by the end of the year, but there are growing risks that a higher cash rate will be needed to contain inflation.’
Australia’s economic woes are far from over as the Organization for Economic Co-operation and Development downgrades Australia’s economic position.
The OECD now expects real GDP to grow by 4.1 percent in 2022, down 0.1 percentage point from June forecasts, and 2 percent in 2023, down 0.5 percent the mid-year forecasts.
Core inflation in Australia is also expected to reach 5.4 percent in 2022 before declining to 4.3 percent in 2023.
Core inflation in Australia is also expected to reach 5.4 per cent in 2022 before declining to 4.3 per cent in 2023 (pictured for sale signage outside a Sydney residential property).
The OECD Economic Outlook showed that inflation has spread to many economies since the Russian invasion of Ukraine.
“The impact of war and the ongoing impact of COVID-19 outbreaks in some parts of the world have hampered growth and put additional upward pressure on prices, particularly for energy and food,” the report said.
Despite the doom and gloom, consumers have regained some confidence in the economy.
The 2.1 percent rebound in sentiment was driven by increased confidence in Australia’s economic conditions.
According to ANZ-Roy Morgan’s weekly consumer confidence survey, “current economic conditions” rose 4.8 percent and “prospective economic conditions” rose 6 percent.
The final reading of 87.8 was the highest in four months, but was still well below the long-term monthly average of 111.9.
ANZ economist Catherine Birch said strong spending amid back-to-back rate hikes has allayed fears of a sharp slowdown.
A drop in inflation expectations also boosted the indicator, although motorists are bracing for fuel prices to rise in the coming weeks when fuel taxes are reinstated.
https://www.dailymail.co.uk/news/article-11253575/Interest-rates-set-rise-Australia-RBA-Commonwealth-Bank-NAB-ANZ-Westpac.html?ns_mchannel=rss&ns_campaign=1490&ito=1490 Interest rates in Australia will rise: RBA, Commonwealth Bank, NAB, ANZ, Westpac