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The Reserve Bank of Australia Governor has poured cold water on market predictions that Australia’s interest rate could rise next year, saying it is “still plausible” rates will increase as forecast in 2024.
In a speech to the Australian Business Economists (ABE), RBA Governor Philip Lowe said while inflation is improving better than expected Australia’s economy still has “a way to go”.

“I would like to repeat a point I made a couple of weeks ago — that is, the latest data and forecasts do not warrant an increase in the cash rate in 2022,” Dr Lowe said.

RBA Governor Philip Lowe has said current forecasts “do not warrant” an interest rate hike next year. (Sydney Morning Herald)

“The economy and inflation would have to turn out very differently from our central scenario for the board to consider an increase in interest rates next year.”

Dr Lowe said the RBA forecasts underlying inflation — one of the named triggers of an interest rate hike — to reach a midpoint by the end of 2023.

But simply hitting inflation targets may not be enough to spur on a hike to the rates which are currently sitting at a record-low 0.1 per cent.

“If this comes to pass, it would be the first time in nearly seven years that we will be at the mid-point. This, by itself, does not warrant an increase in the cash rate,” Dr Lowe said.

“As I have said, much will depend upon the trajectory of the economy and inflation at the time.

“It is still plausible that the first increase in the cash rate will not be before 2024.”

The RBA board has said it will be patient in waiting to lift the cash rate. (LOUIE DOUVIS)

The intense scrutiny on Australia’s interest rates comes as many experts attribute record-low rates to the nation’s currently booming property market.

Dr Lowe said there could be a case to lifting interest rates earlier than 2024 if the opening of Australia’s borders provides an influx of migrant workers well above expectations.

“There is also the question of the effect on labour supply of the reopening of the international border. It is therefore possible that faster-than-expected progress continues to be made towards achieving the inflation target,” Dr Lowe said.

“If so, there would be a case to lift the cash rate before 2024. It is also possible that progress will be slower than expected, which would result in the cash rate staying at current levels for longer.”

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Source: 9News

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