Australia is confident to participate in the international tightening cycle. It happens because of the acceleration of inflation and higher global rates. The indication is a near-term end to the central bank’s ultra-accommodative stance, said IFR Asia. The release of the Reserve Bank of Australia, allows the expectations for June rate rise hurdle. Based on the statement, the inflation prediction would rise above 3% from 2.6%.
The board said previously that it wanted the evidence of an inflation sustainability target from 2% to 3%. The target range would likely increase the interest rate in which it requires faster wages growth. The board members noted the increase in fuel, food, and other commodities prices. It indicates that non-labor input cost pressures are persistent longer than expected.
Recent information has shown that gradual increase remained in the aggregate wages growth. Based on the reports from the bank’s liaison programme, the private sector wages growth should continue to pick up to the 2% range. In a meeting on April 5, the RBA board chose to be patient in raising interest rates.
The bank left the official cash rate unchanged at a record low 0.1%. It is not seen as a raise in the OCR before the Fed election. The future market prices at a 15bp rate rose in June to 0.25%. It indicates a 2% OCR at the end of 2022. Meanwhile Westpac expects a 40bp June increase. RBA has its own strategy to catch up with the Reserve Bank of New Zealand.
It became the fourth OECD country to escalate interest rates since Covid-19 after Norway, Czech Republic, and South Korea. The initial 25bp increase at the RBNZ followed the two subsequent quarter-point rises in November and February. It was before the official cash rate from larger-than-expected 50bp.
