Reserve Bank deputy governor Andrew Hauser has told a Sydney investment conference that the inflation outlook is “materially worse” than the central bank had forecast, and that another rate rise could come as soon as November.
Annual inflation currently sits at 4 per cent, according to the August consumer price index, well above the RBA’s 2 to 3 per cent target. Mr Hauser said the bank’s business surveys and liaison program show a growing share of firms now see 3 to 3.5 per cent inflation as the “new normal”. He called that a “central banker’s nightmare”.
Markets now put the chance of a November hike at 42 per cent, according to LSEG data. That was below 20 per cent last week, before the unemployment rate hit a five-year high in September. Mr Hauser said the jobs numbers may include some “noise” and that the labour market still needs to ease.
He acknowledged the pain higher rates cause households on top of cost-of-living pressure, but argued it is meant to prevent worse pain later if inflation expectations get locked in. The board’s next decision and new forecasts are due on 3 November, Melbourne Cup day.
What it means for your money
If you have a variable-rate mortgage, it’s worth checking now how much room your budget has for another increase, and whether a lender would give you a sharper rate if you ask. Savers may see deposit rates hold up for longer.
Source: ABC Business