Lowe warned that poor people would be hurt the most if Australia’s inflation outbreak was left unchecked.
Expectations of higher interest rates firmed further after Reserve Bank governor Philip Lowe shrugged off political pressure over tighter monetary policy that is squeezing households, declaring that inflation remains “way too high” and not acting to bring it down would create further pain for the poorest Australians.
But Dr Lowe, smiling throughout the 90-minute ordeal, methodically made his case for why more rate rises were necessary to quell inflation, telling politicians the alternative of even stronger inflation and higher rates would lead to more job losses. This implies at least three more increases designed to get inflation back into the Reserve Bank’s target of 2 per cent to 3 per cent by mid-2024.Earlier on Wednesday, data showed consumer prices in the United States rose 0.5 per cent in January, clipping annual inflation from 6.5 per cent to 6.4 per cent. The smaller than expected deceleration signalled that consumer prices are stickier than economists expect and that the US Federal Reserve is unlikely to cut rates this year.
NAB head of market economics Tapas Strickland said Dr Lowe’s comments suggested the central bank was more worried about high inflation than the risk of a slowdown, justifying expectations of more rate rises. While credit quality remains strong – loan arrears are at record lows – the result shows that high-interest rates are expected to squeeze some customers.CBA’s loan impairment expense jumped by $586 million, “reflecting ongoing inflationary pressures, rising interest rates, supply chain disruptions and decline in house prices”, the bank said.costs meant consumers were shifting to value-oriented retailers such as Bunnings, Kmart and Target.
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