Daily London
It’s no secret a rate hike is expected today, but why exactly is that the case?
As always, much of it has to do with inflation, which, after spending some time sitting pretty in the RBA’s target range of 2 to 3 per cent last year, has unexpectedly shot up.
Last week, the ABS released inflation figures for December, which came in far hotter than expected, both on the headline and underlying fronts.
That, in turn, followed an initial unexpected jump in the September quarter. In fact, headline inflation has now been above 3 per cent since August last year.
Another consideration for the RBA is the unemployment rate, which continues to sit at historically low levels – it was just 4.1 per cent at last count.
That’s obviously fantastic for Australians – we want the unemployment rate to be nice and low – but it can also give the RBA a bit of confidence that it can increase the cash rate without throttling the economy.
Combine those two factors, and it’s easy to see why most economists think a rate cut is locked in today.
