FLAU - Why It's Getting Harder To Dismiss The Possibility Of Rate Hikes In Australia
2024-06-08 11:30:00 ET
Summary
- Sticky inflation means the Reserve Bank of Australia will struggle to justify rate cuts this year – indeed, the chance of a further increase in rates is growing.
- Differences in the mortgage structure between the US and Australia may mean that Australian households have less insulation against policy rate hikes than their US counterparts.
- In fairness to the RBA, it has been clear that it did not see inflation returning to target until later in 2025.
After a good start, inflation is now going back up
Much like the Federal Reserve, expectations for easing from the Reserve Bank of Australia ((RBA)) were strong at the beginning of this year. But after an initially impressive decline from the 8.4% year-on-year December 2022 peak, progress in getting inflation lower has ground to a halt and even reversed in recent months. As it has done so, market expectations for rate cuts have evaporated....
Why It's Getting Harder To Dismiss The Possibility Of Rate Hikes In Australia