RBA Rate Rise Threat Rings Hollow Amid Weaker Inflation Forecasts
The Reserve Bank of Australia (RBA) has been making noise about potentially raising interest rates to combat inflation, but its own forecasts and analysis suggest it may struggle to follow through on this threat.
RBA governor Michele Bullock stated that the bank's inflation forecast was for 3.8% by June, which is lower than expected, and unemployment is expected to be a tad higher than forecasted.
The RBA also downgraded its wage growth forecast and sliced its household spending forecasts, with a cut in expectations for housing investment.
The bank's own analysis suggests that the main drivers of inflation are household spending and housing construction costs, which it believes will be weaker due to lower house prices and fewer prospective home buyers.