Borrowers to feel five rate hike shock<\/a><\/p>\n\u201cAlthough headline inflation rose sharply in March, \u2018underlying\u2019 inflation was unchanged from February at 3.3,\u201d Mr Eslake said. \u201cYes, that\u2019s still above the top end of the RBA\u2019s inflation target band, but no more than it was a month ago. And the increase in fuel prices has a similar impact on aggregate household finances to a further increase in interest rates. <\/p>\n
\u201cSo if \u2018underlying\u2019 inflation hasn\u2019t risen further, the RBA doesn\u2019t need to raise rates again in May (since it\u2019s already raised them twice this year). It can afford to \u201cwait and see\u201d what happens to inflation expectations.\u201d<\/p>\n
![\"RBA](\"data:image\/svg+xml,%3Csvg)
<\/p>\n
Some experts believe RBA Governor Michele Bullock will hold rates in May. Picture: Martin Ollman<\/p>\n
James Morley of University of Sydney also pointed to underlying inflation.<\/p>\n
\u201cThe fact that underlying measures of inflation did not go up too much in the March report and developments in the Middle East \u2026 may well lead the RBA to hold at this meeting as a way of moderating the pace of rate increases given the conflicting tensions of a supply shock on inflation and the real side of the economy. Prior to the inflation report, I thought the RBA would increase, in part in anticipation of an expansionary federal budget. But I suspect they will hold.\u201d<\/p>\n
Adjunct Professor Noel Whittaker of QUT said a hold was \u201cthe only practical option\u201d.<\/p>\n
\u201cTo me, it would be economic madness to raise rates in this time of uncertainty,\u201d he said. \u201cAnd even though a recession is forecast, it\u2019s not happening yet. So they won\u2019t be dropping them.\u201d<\/p>\n
David Robertson of Bendigo Bank said he expects two more RBA hikes in this cycle, but urged restraint in May.<\/p>\n
\u201cI\u2019d prefer to see a less aggressive approach especially with Consumer Confidence falling to a record low,\u201d he said.<\/p>\n
Evgenia Dechter of UNSW said the \u201cmain driver\u201d of the latest inflation reading was \u201chigher oil prices\u201d.<\/p>\n
<\/p>\n
Laing + Simmons\u2019 Leanne Pilkington said the RBA should \u201cthink twice\u201d before hiking.<\/p>\n
\u201cThe oil shock and the Middle East conflict were already factored into the RBA\u2019s previous decision,\u201d Dechter said. \u201cSo this time the RBA may prefer a wait-and-see approach as more data come in, especially with business and consumer confidence looking weak.\u201d<\/p>\n
Leanne Pilkington of Laing + Simmons agreed.<\/p>\n
\u201cIt is clear that the major culprit is fuel. People are already experiencing pain relative to higher rates each time they fill up their car, so the RBA should think twice before adding to this pain, especially just before the Budget,\u201d she said.<\/p>\n
Jeffrey Sheen of Macquarie University, Stephen Miller of GSFM and Cameron Murray of Fresh Economic Thinking were also in the \u2018hold\u2019 camp.<\/p>\n
Richard Whitten, home loans expert at Finder, said another rate rise would be a bitter pill to swallow for households already reeling from rising costs.<\/p>\n
\u201cAnother rate rise would take the cash rate back to its 2024 peak, but the economic environment is tougher now,\u201d he said.<\/p>\n
<\/p>\n
Finder\u2019s home loans expert Richard Whitten.<\/p>\n
\u201cInflation has continued to rise in that time, meaning Australians are in an even worse position than they were two years ago.<\/p>\n
\u201cWhile default rates remain low, and the RBA likely believes borrowers can handle a slightly elevated rate, it\u2019s hard to imagine rates going much higher without something breaking.\u201d <\/p>\n","protected":false},"excerpt":{"rendered":"Economist Saul Eslake is one of nine experts to predict a rate hold at the RBA\u2019s May meeting.…\n","protected":false},"author":2,"featured_media":624048,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101],"class_list":["post-624047","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/624047","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=624047"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/624047\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/624048"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=624047"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=624047"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=624047"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}