The Reserve Bank of Australia (or Reverse Bank as we like to call it) is one step closer today to admitting that it has completely messed up with its 2024 rate rise timeline. By ending its bond buying program, the RBA is setting the stage for the inevitable which will be consecutive rate rises from an ultra low level currently.
Inflation targeting is a central bank’s main mandate. But something more important is credibility. There has been a growing chorus in the past few months suggesting that the RBA is at risk of losing credibility. It’s not at that stage yet, but we sense a massive backtracking effort and perhaps attemps to overcorrect over the next few months.
There was no reference to 2024 and even though the last paragraph contains an elaborate attempt to hold ground, its hard to shrug off momentum in the labour market and rising inflation which doesn’t seem to be going anywhere anytime soon.
Bottom line: The RBA has now shifted gears and is likely to increase rates later this year. There’s a bit of face saving to occur in the next couple of months, nobody likes to admit they messed up. But there’s no doubt that the direction of monetary policy has changed.
The statement noted a modest slowdown in the rate of property price growth in recent months. We believe that will continue, with investors shifting their focus from capital gains to income growth in the coming year. Sydney and Melbourne metro markets are the real beneficiaries.
Flashnote published by Peter Esho, Co-Founder at Wealthi. For more commentary, please contact Eva Diaz, Head of PR & Communications email@example.com