Economists predict that the RBA will increase the interest rate three times this year.
This week’s data did not provide homeowners with any hope of a rate cut this year.
According to the data, inflation has dropped since December, from a high of 4.1 percent to a low of 3.6 percent.
Despite the drop in inflation, the country’s economy still faces price pressures, especially in services such as health, education, and insurance.
Warren Hogan, the chief economic adviser of Judo Bank, warned that the situation could get worse before it gets better.
According to Hogan, the central bank will likely increase its rates by three times this year. This would push the cash rate to around 5%.
He noted that the official cash rate of 4.35 percent is not the appropriate level.
The Reserve Bank of Australia’s (RBA) strategy is not working, as it has been trying to maintain a low interest rate environment.
According to Hogan, the central bank needs to increase the cash rate to 5%, similar to the rates in other countries such as the US, UK, and New Zealand.
He believes that the next increase will come in August, September, and November.
Despite the release of March quarter inflation data, Hogan’s prediction has not changed. He is still concerned about the country’s labor market, as businesses are struggling to find workers. This month, the Bureau of Statistics reported that the unemployment rate increased to 3.8% in March.
The data showed that inflation was higher than expected, but it was 0.1 percent lower than expected. This indicated that the RBA doesn’t plan on cutting rates anytime soon. According to Michael Malakellis, an economist at KPMG, the central bank needs to see signs of a more balanced labor market before it can consider reducing the interest rate.
After the release of the CPI data, which was higher than expected, the country’s third largest bank, Westpac, pushed back its prediction for the interest rate reduction from September to November. It joined the other two major banks in forecasting a rate reduction in the next couple of months.
Economists believe that the central bank will start reducing interest rates next year. However, they also have varying expectations about how many cuts will be made. Sally Tindall of RateCity noted that the impact of the rate reduction on borrowers will be huge.