Grogonomics Those calling for higher interest rates in Australia should be careful of what they wish for
It seems that some people really want a recession. The estimates of inflation not falling below 3% until the end of next year has led some commentators to demand higher rates as though there is an ability to have inflation drop quickly while at the same time delivering the hoped for economic “soft landing”.
After the RBA’s decision on Tuesday to keep rates steady, you would be forgiven for thinking that a rate rise is imminent. Other than Peter Hannam who maintained a level of calm, some media organisations were suggesting rate rises are now much more likely and that there is a sense of doom ahead for inflation.
It might therefore be somewhat surprising to be told that the market’s expectations for a rate rise are actually lower now than before the RBA’s decision on Tuesday.
A month ago, I suggested that it was unlikely we would see a rate cut soon. Back then the market was still predicting rate cuts this year; now they are not. Cuts are on the horizon, but probably not until next year:
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This is not what those who believe rates need to rise want to hear.
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Judo Bank chief economic adviser Warren Hogan has, for example, called for higher interest rates – as high as 5.1%. Hogan last year commented on a scenario in........
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