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Reserve Bank of Australia Governor Philip Lowe does not expect the conditions to raise the policy rate in 2022, despite a glowing assessment of the economic outlook.
In what is set to be his last public appearance of the year, Dr Lowe told a conference in Wagga Wagga, NSW that the economy is in recovery mode and the unemployment rate is expected to head towards 4% by 2023.
He reiterated that the RBA board will not increase the cash rate until real inflation is durably within the target range of 2-3%.
âWe are still a long way from that point. In our central scenario, the condition of an increase in the cash rate will not be met next year, âhe told the CPA Australia Riverina Forum on Thursday.
“It will probably take time for this condition to be met and the board is prepared to be patient.”
RBA’s Philip Lowe says unemployment rate is expected to hit 4% by 2023
Dr Lowe believes that with the lifting of COVID-19 lockdowns, spending is rebounding quickly, although he admits that the Omicron variant outbreak poses a downside risk.
“We expect the positive dynamics of the economy to continue through the summer, supported by the openness of the economy, high vaccination rates, significant fiscal and monetary support and strengthening of household and corporate balance sheets, âhe said. noted.
Dr Lowe said while households typically dipped into their savings during an economic downturn, this time they had increased them substantially to over $ 200 billion.
âProvided people have the capacity to spend – and the confidence to do so – these additional savings will support strong consumption growth over the coming months,â he said.
The central bank expects the unemployment rate to reach 4.25% by the end of 2022 and 4% by the end of 2023, supported by a sharp increase in job vacancies and vacancies. ‘use.
But he believes that while inflation in the United States has reached its highest level in nearly four decades, the situation in Australia is quite different.
Core inflation at 2.1% has just returned to the target range for the first time in six years, and although the Consumer Price Index is around 3%, it is well below to that of the North Atlantic.
One reason is that while electricity prices have risen sharply in a number of countries, they have fallen in Australia, while wage growth has remained relatively weak.
âThere are certainly hot spots where wages are getting higher and higher, but most workers still receive wage increases starting at two (percent) and sometimes lower than that,â he said.
“The RBA expects wage growth to accelerate further but, at the aggregate level, will only do so gradually.”