The attention of every xjmtzyweconomist in Australia will be on the National Press Club in Sydney when Reserve Bank governor Philip Lowe speaks, no doubt again attempting to hose down intense interest rate hike speculation.
Dr Lowe’s address on Wednesday is entitled ‘The Year Ahead’ and comes a day after the central bank held firm on the historic low cash rate of 0.1 per cent after its first board meeting of the year.
He admitted the red-hot inflation roiling financial markets had exceeded his predictions, prompting him to upgrade the RBA’s economic forecast and set the scene for a potential 2022 rate hike.
There’s also been a better-than-expected improvement in the jobs market, which is expected to put a rocket under sluggish wages growth.
Despite a roaring economic rebound, Australia’s official cash rate was not predicted to shift on Tuesday and was held where it has been since November 2020, having last increased in 2010.
Dr Lowe has previously said there will not be a rate hike until at least 2023, but the economic recovery has led economists and financial markets to tip an August rise, with July or June as an outside chance.
IG market analyst Kyle Rodda noted the ASX200 “popped” after Tuesday’s decision.
“Supply side pressures, the main driver of recent inflation, ought to ease, and with wages growth still sluggish, evidence of sustained inflation is not yet conclusive,” Mr Rodda said.
“Rightly or wrongly, the RBA sees no need to rush into rate hikes right now, even if it has scrapped its call that rates are unlikely to rise until the end of 2023 or 2024.”
Banks have already been moving in anticipation of a cash rate hike, with Canstar reporting there were more than 6000 fixed interest rate hikes over the past six months, leaving variable rates the last remaining bargains.
