Robertson stated that the central bank might be influenced by the current stress in the US banking system, with US regulators taking swift action to stabilise their banking system following the collapse of Silicon Valley Bank. The US Federal Reserve is now expected to take rates to around 5%, with a 6% rate no longer being discussed. For the RBA, this gives another reason to pause rate hikes for the moment, despite needing to keep warning of potentially higher rates until inflation is back near its target.
Inflation and unemployment rates also suggest a rate hike pause is likely as soon as next month. Robertson said that inflation and the jobs market have peaked and that the unemployment rate has increased. A greater share of the family budget is needed for interest repayments as well as the ongoing impact of inflation making all goods and services more expensive. Tourism and international arrival numbers continue to pick up, and demand for Australian exports remains strong, which will be crucial to offset the slowing in household spending as higher interest rates weigh on demand.
Moreover, Robertson highlighted that the release of wages growth data has been more benign than forecast, and the unemployment rate has increased further to 3.7%. GDP data also showed a deceleration in growth and in household spending, and the monthly Consumer Price Index fell from 8.4% to 7.4%. The cumulative impact of the aggressive tightening cycle is starting to show, suggesting that inflation peaked in December.
Overall, while the pause in interest rate hikes may only be temporary, it provides relief to borrowers, who have been dealing with rising costs. Still, it's essential to keep monitoring market developments and paying close attention to global economic indicators to predict any changes in the interest rate landscape in the future.
