Two leading economists remain skeptical about the Reserve Bank of Australia's (RBA) decision to cut interest rates in February, despite recent inflation data prompting many financial institutions to revise their forecasts. While several major players predict a February rate cut, Warren Hogan of Judo Bank and Brendan Rynne of KPMG argue that government subsidies are artificially suppressing inflation and that the RBA should hold off on any reductions.
Two prominent economists have refuted predictions of an imminent interest rate cut by the Reserve Bank of Australia ( RBA ) in February , despite a growing chorus of major financial institutions revising their forecasts downwards.
While a number of entities, including Westpac, Bank of Queensland, Citi, UBS, IFM Investors, and several others, have shifted their anticipated rate cut to February following the release of new inflation data, Warren Hogan, chief economic advisor at Judo Bank, and Brendan Rynne, KPMG chief economist, maintain their stance against a February reduction. The December inflation figures showed a 3.2 percent increase for the year, a key metric the RBA will scrutinize when determining the cash rate. Headline inflation also dipped by 0.4 percent to 2.4 percent during the period. However, Hogan argues that government subsidies and rebates, implemented to alleviate the cost-of-living crisis, have artificially suppressed inflation. He cites the Labor government's Commonwealth Energy Bill Relief Fund rebates, alongside state subsidies in Western Australia, Queensland, and Tasmania, which contributed to a 9.9 percent quarterly and a 25.2 percent yearly decline in certain areas.Hogan contends that these subsidies, encompassing public transport, electricity, rents, and childcare, are distorting the inflation picture. He predicts that once these subsidies cease, likely on July 1, inflation will surge. Similarly, Rynne emphasizes that the trimmed mean inflation remains too elevated for the RBA to justify a rate cut in February. He anticipates the RBA will likely hold rates steady at the February meeting and potentially reduce them by 25 basis points at the April meeting. Both economists agree that the withdrawal of government cost-of-living relief measures will likely push inflation back above the RBA's 3 percent target band
RBA Interest Rates Inflation February Economists Government Subsidies Cost Of Living
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