Flashnote by Peter Esho: RBA walks the talk
The Reserve Bank of Australia (RBA) hiked the cash rate up by a widely expected 50 basis points, with RBA governor Philip Lowe saying the Australian central bank remained committed to returning inflation to the 2-3% range.
According to Peter Esho, Co Founder at Wealthi the today's RBA move wasn’t a surprise.
“All major central banks around the world and focused on containing inflation and recent economic data suggests that their underlying economies are strong enough to contain and manage higher interest rates.”
The most important thing for us in the RBA commentary is their forecast for inflation to fall back to 4% next year. We all know the RBA is hopeless at forecasting, given recent experience. Any quicker than expected pullback in inflation will be enough for the RBA to pause their rate hikes and sit on their hands.
Bottom line: We continue to believe that inflation has peaked, as the RBA agrees and that growth will start to fall in the coming months. The unemployment rate will start to rise late this year and we believe the RBA has one more rate hike in the bag before it stops and potentially starts to pull back next year on a faster than expected inflation fall.
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