It’s the million-dollar question that’s been on everyone’s lips: what will the Reserve Bank of Australia (RBA) do with interest rates next? Will they hold steady, or is another hike on the horizon? With so much uncertainty, it’s easy to feel like we’re all caught in a guessing game. Well, here’s the latest—brace yourself, because it’s not exactly good news for mortgage holders.
Inflation Numbers That Don’t Quite Add Up
Australia’s inflation numbers came in with a slight drop, but don’t be fooled into thinking it’s all smooth sailing ahead. The headline annual inflation rate fell to 3.4% for the year until November, which is better than expected. But, as any seasoned economist will tell you, there’s more than meets the eye when it comes to inflation. The trimmed mean inflation, the number that the RBA pays the most attention to, only dropped a little—to 3.2%. Not exactly a sharp turn toward stability.
Harry Ottley, an economist at the Commonwealth Bank, has pointed out that this drop is a mixed bag. While the cost of goods like those Black Friday sales items went down, the prices of services, including housing-related costs, are still on the rise. So, what’s the RBA to do? If you ask Ottley, the answer is simple: expect another cash rate hike in February. He’s betting on a 0.25% increase, bringing the official cash rate to 3.85%.
The Tug-of-War Over Rate Hikes
But, not everyone’s on the same page. Over at ANZ and Westpac, there’s a bit more optimism. Both banks are predicting that the RBA will hold the rates steady at 3.60% for now. Their reasoning? They’re waiting for the quarterly inflation figures at the end of January, which they hope will show a slowing of inflation. A bit of cautious optimism, perhaps, but the timing could make all the difference.
Westpac’s economist Justin Smirk points to the moderating impact of energy prices, thanks to the phasing out of state and federal subsidies, as a sign that things might be cooling off, reports Yahoo Finance. But, of course, it’s hard to say for certain. If inflation keeps climbing, all bets are off.
The Bottom Line: Rate Hikes Could Keep Coming
One thing’s for sure: the RBA has a tough job ahead of them. As the economy struggles with rising inflation and housing costs, it’s becoming clear that rate hikes might not be a thing of the past just yet. In fact, some economists, like Warren Hogan from EQ Economics, are already predicting that the cash rate is “too low” and that we could see multiple hikes before the financial year ends.
If you’re feeling the strain of higher mortgage payments, you’re definitely not alone. With no clear answer on what the RBA will do next, it might be time to buckle up for a bumpy ride ahead. Whether rates go up or hold steady, one thing is certain: it’s going to be a tense wait until February 3rd when the RBA makes their big decision.
