Philip Lowe expected to announce 10th consecutive rate rise

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The Reserve Bank of Australia is expected to increase the official cash rate for the tenth consecutive time when the board meets on Tuesday, with analysts from the big four Banks predicting more carnage from now to May.

The consensus among economists suggest the cash rate will increase by 25 basis points, to 3.6 per cent, the highest it’s been since June 2012.

According to Canstar, the interest rate hike will see homeowners with a $500,000 mortgage pay an additional $79.95 a month.

Analysts from the big four banks have forecast the rate to peak between 3.85 per cent to 4.1 per cent by May, which would suggest one to two more rate rises after Tuesday.

Westpac Chief Economist, Bill Evans believed the cash rate will peak at 4.1 per cent after two more rate increases in April and May, before coming down in March 2024.

ANZ and NAB have released similar predictions, while the Commonwealth Bank is slightly more optimistic. It has flagged one more 0.25 per cent increase in April, which will bring the cash rate to 3.85 per cent.

After handing down last month’s rate rise, RBA Governor Philip Lowe flagged further pain for borrowers, as the board attempts to bring inflation into its target range of 2 to 3 per cent.

The Consumer Price Index hit a 30-year high of 7.8 per cent in December, however the Australian Bureau of Statistic’s monthly indicator suggests it decreased to 7.4 per cent in January.

“The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary,” he wrote in a statement.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”

Judo Bank economist, Warren Hogan said the rates rises were necessary to curb household spending, and believed they were “far too low for the economic circumstances”.

“The Australian consumer is really fighting the RBA here by dipping into their savings and not slowing their spending all that much,” he told Sky News on Monday.

He added that rate rises were more preferable to the alternative.

“The real risk here in the next two or three years is that if the economy and inflation gets away from us, that we have to raise rates by two or three percentage points more from here and of course inevitably create a severe recession,” he said.

“I think that is the scenario that has to be avoided.”

RBA Governor Philip Lowe warned of multiple “further increases” in February. Picture: NCA NewsWire/ Gary RamageRBA Governor Philip Lowe warned of multiple “further increases” in February. Picture: NCA NewsWire/ Gary Ramage

Treasurer Dr Jim Chalmers also ruled out the possibility of a 1990s financial crisis where the interest rate peaked at 17.5 per cent, and said he didn’t believe Australia would go into a recession.

“The Treasury forecasters, the Reserve Bank and others are not expecting a recession,” he said, speaking to journalist Tom Steinfort on 60 Minutes.

“But I need to be upfront with your viewers and say that we do expect our economy to slow considerably.”

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