Interest rates are to remain on hold at 4.35% for the RBA tomorrow.
I think the story of 2024 might be… ‘RBA interest rates on hold again & again & again with the potential for rate cuts towards the end of the year’ – Maybe.
Interest rates are restrictive
As per usual the financial markets will have bouts of pure paranoia followed by bouts of euphoria. The thing to remember is that current RBA interest rate settings in Australia are restrictive and most people with a loan are hurting. You need look no further than the ongoing doom in retail sales, consumption and consumer sentiment.
Let’s face it for those with mortgages or renting there’s, no spending left to cut. Putting interest rates up is just going to promote spending for those that already own their home outright or have cash.
It’s true that recent quarterly inflation did not fall as expected. The last mile in the RBA’s inflation fight was always going to be the hardest. However the RBA is not projecting inflation to return to their 2% – 3% target band until the end of 2025.
Sticky USA inflation
Continuing strong employment-growth and sticky inflation in the USA is fuelling concerns that inflation may spill over and reignite our inflation story. However their central bank governor sees their interest rates as sufficiently restrictive and expects inflation to ease over 2024.
Unemployment the one to watch
Our restrictive interest rates should do the job on inflation in the long run but there are going to be bumps in the road. As emphasised previously the unemployment rate is the one to watch to get a sneak peak on how the economy and inflation might be tracking.
Don’t be surprised if the RBA Governor tries to spook everyone tomorrow with the possibility of future rate hikes. It’s much easier for her to threaten than to follow through.
Interest rates on hold—again!
Interest rates are to remain on hold at 4.35% for the RBA tomorrow.
I think the story of 2024 might be… ‘RBA interest rates on hold again & again & again with the potential for rate cuts towards the end of the year’ – Maybe.
Interest rates are restrictive
As per usual the financial markets will have bouts of pure paranoia followed by bouts of euphoria. The thing to remember is that current RBA interest rate settings in Australia are restrictive and most people with a loan are hurting. You need look no further than the ongoing doom in retail sales, consumption and consumer sentiment.
Let’s face it for those with mortgages or renting there’s, no spending left to cut. Putting interest rates up is just going to promote spending for those that already own their home outright or have cash.
It’s true that recent quarterly inflation did not fall as expected. The last mile in the RBA’s inflation fight was always going to be the hardest. However the RBA is not projecting inflation to return to their 2% – 3% target band until the end of 2025.
Sticky USA inflation
Continuing strong employment-growth and sticky inflation in the USA is fuelling concerns that inflation may spill over and reignite our inflation story. However their central bank governor sees their interest rates as sufficiently restrictive and expects inflation to ease over 2024.
Unemployment the one to watch
Our restrictive interest rates should do the job on inflation in the long run but there are going to be bumps in the road. As emphasised previously the unemployment rate is the one to watch to get a sneak peak on how the economy and inflation might be tracking.
Don’t be surprised if the RBA Governor tries to spook everyone tomorrow with the possibility of future rate hikes. It’s much easier for her to threaten than to follow through.
Let’s see
by Boris Sfiligoi
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