It may lack gluttony, wrath and lust, but RBA governor Philip Lowe has painted a picture of financial hell if interest rates do not bring down inflation.
Reserve Bank governor Philip Lowe fears Australians could find themselves lost in one of Dante’s circles of hell - the one named inflation.
But before his crowd started to believe the bank was about to seek absolution for its past mis-deeds, Lowe effectively warned them to abandon all hope of financial relief: the RBA is not yet finished with rate rises.“It is a scourge. High inflation devalues your savings. It worsens inequality in our society and it undermines our living standards. It hurts us all by impairing the functioning of our economy,” he said.
“If this were to happen, the evil of inflation would be with us for longer and the eventual increase in interest rates needed to bring it down would be greater,” he said.“This would increase the risk of a severe recession and a sharp rise in unemployment. It would be much better to avoid such a costly outcome and so we have acted strongly to avoid it.”
Despite the hefty increase in mortgage rates - equivalent to more than $1000 a month on an $800,000 mortgage since May - the bank has upwardly revised its inflation outlook.Yet, the RBA now reckons inflation will be around 4.75 per cent at the end of next year and “a little above” 3 per cent at the end of 2024.But Lowe also revised down the RBA’s outlook for economic growth. It was tipping growth to average 1.75 per cent over the next two years, but that now looks around 1.5 per cent.
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