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Add as a preferred source on Google Inflation is likely to continue running hot into the end of the year, with the Reserve Bank issuing a warning on the likely path for interest rates as it prepares to make a decision in two weeks’ time. As the Middle East conflict continues to impact on inflation across the globe , Reserve Bank assistant governor Sarah Hunter has said the lack of a resolution between the United States and Iran is leaving Aussies increasingly vulnerable to higher prices. Speaking at the Regional Australia Institute on Monday, Dr Hunter said inflation risks were still skewed to the upside, meaning inflation is likely be higher than expected.
Dr Hunter said a failure for a peace deal in the Middle East meant petrol and diesel costs in particular will continue to rise, with households and businesses feeling the flow on strongly. The government has been under pressure to rethink the recently removed fuel excise discounts after tensions in the Strait of Hormuz saw oil return to above USD$100 per barrel last week. Oil tankers in the Strait of Hormuz.
Picture The mounting effects of the conflict are expected to see the Federal Reserve raise interest rates in the US on Wednesday for the first time in three years – a turning point that may push the RBA down a similar path. “There's a lot going on at the moment; lots of shifts and shocks that are occurring globally,” Dr Hunter said. “The conflict hasn't reached a sustainable resolution.
We are definitely concerned about what that means for fuel prices and the flow of crude oil and then refined products through the global economy.” Despite uncertainty, Dr Hunter said households, household spending, retail spending, travel and tourism appear to be holding up – an indicator the RBA may see space for more rate hikes. RBA assistant governor Sarah Hunter has signaled inflation risks remain on the upside. Picture: NewsWire / Martin Ollman “But there's a real mixed picture at the moment,” Dr Hunter said.
“We're very conscious that for many members of the community, it's a tough time. “We know that. We hear from those people.
We are very cognizant of that. But if we look at that big picture, it does seem like the households are holding up all right. Business investment is actually picking up a bit.” Holding fire Persistently high underlying inflation in July, confirmed in data published earlier this month, will be the last inflation information the RBA will see before its 29 September decision.
The RBA is heavily dependent on the Australia Bureau of Statistics’ monthly inflation data when making calls on interest rates, though a timing nuance this month means the bank will be forced to settle for the older data. The board will need to make the next call on the cash rate on 29 September, with the latest ABS figures – which will cover August – not set to be published until a day later. Westpac’s economic team says it expects the board to wait for the data before hiking the cash rate, with the Commonwealth Bank and ANZ also anticipating the cash rate will stay at 4.35% for now while the RBA waits for more information.
The big four banks are split on when they expect the RBA to next hike rates. Picture: Supplied National Australia Bank has forecast a rate hike however, with markets having also priced in a 76% chance for Tuesday week. The move which would mark a major milestone for Australia with the highest interest rates seen in close to 15 years.
“There's just going to be more uncertainty,” Dr Hunter warned. “Perhaps there's more of these shocks coming through over the next few years than we've experienced over the last, say, 15-odd years, so post GFC through to Covid. “We're all going to have to get a bit more uncomfortable with uncertainty and a bit more resilient to these shocks because that's what the environment is now.” Help us improve your reading experience Got a minute?
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Source: realestate.com.au
