Cash-strapped mortgage holders may be spared further interest rate pain after the consumer price index dropped below market expectations, but one economist has issued a grim warning.
Australia’s headline annual inflation rate dropped to 3.4 per cent from 3.8 per cent for the 12 months until November.
Meanwhile, the all important trimmed mean inflation rate – which the Reserve Bank uses as it strips out volatile items including fuel – slipped to 3.2 per cent from 3.3 per cent for the year.
Australia’s inflation rate remains above the Reserve Bank of Australia’s 2 to 3 per cent target. Picture: NewsWire / Nicholas Eagar
But Judo Bank chief economic adviser Warren Hogan had a blunt message for mortgage holders, saying despite the falls in inflation, interest rates still needed to rise.
“There’s less than a quarter of the CPI basket that is below the RBA’s target band,” Mr Hogan told Sky News.
“The reality is over the last six months the economy is improving and inflation is rising, so this rate they have is probably not appropriate.
“I think they should raise rates in February.”
Mr Hogan said the should wait for the quarterly figure that comes out in three weeks time, with anything above 0.9 per cent for the three months would mean interest rates needed to be hiked.
The RBA will next meet on February 3.
VanEck deputy of investments and capital markets Jamie Hannah had a more positive message for millions of mortgage holders, forecasting they could be spared further interest rate pain in February.
“Had inflation continued to move north, this could have sealed the deal for a rate hike next month, which would be the first increase in more than two years,” he said.
“As it stands, the positive developments from today’s inflation print could be enough to keep the rate hike wolves at bay for now, but the outlook over 2026 is far from certain.”
Australia’s yearly inflation rate came in at 3.4 per cent. Picture: NewsWire /Flavio Brancaleone
Despite the falls, both figures remain above the Reserve Bank of Australia’s target range of 2 to 3 per cent, meaning a rate cut in February is still unlikely.
Prior to Wednesday’s announcement, economists had forecast yearly headline inflation to ease from 3.8 per cent for the 12 months until October to 3.6 per cent in November.
Leave a Reply