ANZ unveils bleak prediction, adjusts forecast for RBA’s terminal cash rate


In response to the nation’s escalating inflation rates, ANZ has revised its previous forecast, deeming a terminal cash rate of 4.1 per cent insufficient to address the issue.

The bank now predicts that the Reserve Bank of Australia’s (RBA) terminal cash rate will need to be raised to 4.35 per cent.

ANZ stated, “We no longer believe that 4.1 per cent will be adequate to bring inflation back to the target within a reasonable time frame. We anticipate a move as early as August.”

Although the inflation rate for this month shows a higher annual increase of 6.8 per cent, surpassing the 6.3 per cent rise reported in March 2023, it remains below the peak of 8.4 per cent observed in December 2022.

Michelle Marquardt, the head of price statistics at the Australian Bureau of Statistics (ABS), attributed the consistently high inflation in April to the soaring prices of fuel.

She emphasised the significant role played by automotive fuel in driving up the annual movement, highlighting the impact of the halving of the fuel excise tax in April 2022, which was fully reversed in October 2022.

During a recent Senate estimate hearing, RBA Governor Philip Lowe faced rigorous questioning and refrained from declaring victory over inflation, implying that Australians should brace for further cost-of-living challenges.

Lowe acknowledged that the battle against inflation is far from won, stating, “I will not declare victory until it is truly achieved. Hence, we won‘t be making such declarations.”

The RBA has consistently emphasised the need for the inflation rate to return to the range of 2 to 3 per cent, a milestone it expects to reach it by mid-2025.

Lowe highlighted the ongoing issue of weak productivity growth in the economy, which poses challenges for the RBA in managing inflation.

The RBA is set to release its latest statement on the cash rate next week, following the upcoming June cash rate meeting.

One of Australia’s largest financial institutions has decided to reverse a recent course of action adopted by the “big four” banks.

Westpac on Thursday announced it has decreased its two-year fixed interest rate owner-occupier home loans with principal and interest repayments.

However, it has also increased rates on its one-year fixed owner-occupier home loans and investment property loans.

Westpac’s two-year fixed rate is now 0.40 per cent lower at 5.79 per cent per annum, while its one-year rate has risen 0.15 per cent to also sit at 5.79 per cent.

“Effective today, the new rates are applicable to new fixed rate home loans and existing variable rate home loans for customers looking to fix part, or all, of their loan,” the bank wrote in an email to mortgage brokers.

“Customers need to consider their own financial situation and seek independent advice when considering the option to fix their loan.”

The changes come ahead of Tuesday’s RBA board meeting and follow comments from Lowe at a senate estimates hearing on Wednesday in which he wouldn’t rule out further rate rises.

“I know the higher interest rates at the moment are very unpopular and are hurting people. I know it’s really tough, but, you know, the board discussions think of the alternative,” he told the hearing.

“If we had not increased interest rates … inflation will be higher for longer.

“So what we’re doing now is difficult, but it’s necessary to avoid more pain and even higher interest rates later on.”

He also suggested Australians will need to increase the number of people living in their homes in the future to address the ongoing rental crisis.

The RBA has opted to raise interest rates at 11 of its past 12 meetings as it tries to rein in soaring inflation.



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *