Home loans: surging inflation data raises fears of interest rate hikes

The Reserve Bank has already guaranteed Australians that the interest rate will remain unchanged until 2024, but new data may change that.

Rising gasoline and real estate prices have contributed to a larger rise in inflation, sparking fears that the Reserve Bank may be forced to raise interest rates sooner than expected.

The consumer price index rose 0.8% in the September quarter, according to data from the Australian Bureau of Statistics released on Wednesday, revealing that the price of goods and services was 3% higher than a year earlier.

Motorists are aware of the higher price of fuel, which rose 7.1%, but the broader economic indicator presents concern for millions of debt-ridden Australian homeowners.

House prices have soared across the country as investors take advantage of record 0.1% interest rates, which RBA Governor Philip Lowe has repeatedly assured consumers they will stay unchanged until 2024.

But financial markets have been spooked by rising consumer prices in recent months, and AMP Capital’s chief economist Shane Oliver said the rise in the index had pushed inflation into the range. central bank target of 2-3% to raise interest rates.

The leading financial commentator said the RBA would not hike rates until inflation was kept within the target range, but the rising figure was enough for Mr Oliver to predict that interest rates would rise d ‘by the end of 2022.

“We’re sort of starting to get there,” he told NCA NewsWire.

“They also said that to be sure that the rate will be maintained, they don’t want to just see a peak in the range and then raise the rates. They actually want to see the confidence that it will stay within that range and understand that they want to see full employment and wage growth of around 3% or more.

Mr Oliver said inflation was only one indicator for forcing a hike in cash rates, noting that the RBA would prefer the 4.6% unemployment rate to be closer to 4%, a growth in stronger wages and a wider recovery of the economy like Covid-19 – lifting of the induced blockages.

“Today’s inflation figures in Australia suggest we may be getting closer to the terms of a rate hike and it could happen in a year,” he said.

“But there is still a long way to go, and in the meantime the RBA would likely do other things to remove the extraordinary stimulus it has provided, such as further reducing its bond purchases.”

“.

But Sarah Hunter of BIS Oxford Economics said Wednesday’s figures would provide little indication for a rate hike.

“The transient headwinds associated with rising commodity prices (especially gasoline) and disruptions in the global supply chain will continue, which will keep headline inflation at (or even above) 3 % in the short term, ”she said.

“But since these factors are external, they are very unlikely to cause the RBA to accelerate the first cash rate hike, and their impact will wear off over time as conditions normalize (through increased supply). and / or moderate demand as spending habits shift away from goods). “

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