Borrow
RBA governor urges borrowers to prepare for higher rates
Governor Philip Lowe is urging the populace to prepare for higher interest rates.
RBA governor urges borrowers to prepare for higher rates
Governor Philip Lowe is urging the populace to prepare for higher interest rates.
Reserve Bank of Australia (RBA) governor Philip Lowe has urged borrowers to start preparing for higher interest rates.
Speaking at the Banking 2022 Conference, Dr Lowe said many borrowers have had no experience with an interest rate-rise cycle.
“The last time the RBA increased the cash rate was in November 2010, that’s more than 11 years ago.
“To many borrowers that is going to come as quite an unwelcome development,” Dr Lowe acknowledged.
Last week, the governor acknowledged the risk of waiting too long to lift rates, especially in a world with overlapping supply shocks and a high headline inflation rate.
It was also the first time the governor acknowledged a rate hike could be on the cards for this year.
“It’s not guaranteed, but it’s plausible,” Dr Lowe reiterated on Friday.
The governor, however, stressed that the preconditions for a rate hike have not yet been met.
“We still have modest inflation here,” Dr Lowe said.
He explained that the RBA is still waiting for the 2.6 per cent underlying inflation to sustainably rest within its 2 to 3 per cent target.
But recent developments “have moved us closer to that point,” Dr Lowe said.
“One issue we’re paying close attention to is the inflation psychology. For many years, firms were reluctant to put up their prices and because they didn’t want to put up their prices, they didn’t want to put up wages.
“It’s quite possible a period of protracted headline inflation will see this psychology shift and firms will decide they have to put up their prices and their prices are rising they can afford to pay higher wages,” Dr Lowe continued.
“We’re watching very carefully for any shift in inflation psychology, if that shift occurs, inflation would be higher and more persistent and we would need to respond.”
RELATED ARTICLES
About the author
About the author
Banking
AMP Bank GO adds business overdraft to mobile platform for small businesses
AMP Bank has launched a business overdraft feature within its mobile-first banking platform AMP Bank GO as cash flow concerns continue to affect small business owners across Australia. Read more
Banking
Bendigo Bank named most trusted bank in Australia for 10th consecutive quarter
Bendigo Bank has retained its position as Australia's most trusted bank, according to the latest trust rankings released by research firm Roy Morgan. Read more
Banking
Account-to-account and instant payments set to reshape global payments landscape
A new report from Capgemini predicts that instant payments will account for 22% of all non-cash transactions globally by 2028, signaling a major shift in the payments industry. Read more
Banking
Powell's Jackson Hole speech to shape market expectations on rate cuts
All eyes are on Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole symposium, as investors anxiously await clues about the central bank's future rate decisions. Read more
Banking
Bendigo Bank economist forecasts stable rates for 2024, cuts in 2025
Bendigo Bank's Chief Economist David Robertson is maintaining his prediction that the Reserve Bank of Australia (RBA) will keep interest rates unchanged throughout 2024, with cuts likely to begin in ...Read more
Banking
Hawkish central bank expectations dampen market sentiment, boosting dollar
Recent economic data and central bank communications have dampened the market's appetite for risk assets, leading to a stronger US dollar and a pullback in commodities and equities, according to Ipek ...Read more
Banking
Bank of England expected to provide guidance on future rate cuts at today's MPC meeting
European and UK stocks are outperforming their US counterparts due to a combination of factors, including high valuations in the US, strong corporate earnings from European companies, and expectations ...Read more
Banking
Investors advised to prepare for central bank policy divergence, says deVere CEO
The Bank of England, European Central Bank (ECB), and US Federal Reserve are set to take different paths in their monetary policies, which will significantly impact investors around the world, ...Read more
Banking
AMP Bank GO adds business overdraft to mobile platform for small businesses
AMP Bank has launched a business overdraft feature within its mobile-first banking platform AMP Bank GO as cash flow concerns continue to affect small business owners across Australia. Read more
Banking
Bendigo Bank named most trusted bank in Australia for 10th consecutive quarter
Bendigo Bank has retained its position as Australia's most trusted bank, according to the latest trust rankings released by research firm Roy Morgan. Read more
Banking
Account-to-account and instant payments set to reshape global payments landscape
A new report from Capgemini predicts that instant payments will account for 22% of all non-cash transactions globally by 2028, signaling a major shift in the payments industry. Read more
Banking
Powell's Jackson Hole speech to shape market expectations on rate cuts
All eyes are on Federal Reserve Chair Jerome Powell's upcoming speech at the Jackson Hole symposium, as investors anxiously await clues about the central bank's future rate decisions. Read more
Banking
Bendigo Bank economist forecasts stable rates for 2024, cuts in 2025
Bendigo Bank's Chief Economist David Robertson is maintaining his prediction that the Reserve Bank of Australia (RBA) will keep interest rates unchanged throughout 2024, with cuts likely to begin in ...Read more
Banking
Hawkish central bank expectations dampen market sentiment, boosting dollar
Recent economic data and central bank communications have dampened the market's appetite for risk assets, leading to a stronger US dollar and a pullback in commodities and equities, according to Ipek ...Read more
Banking
Bank of England expected to provide guidance on future rate cuts at today's MPC meeting
European and UK stocks are outperforming their US counterparts due to a combination of factors, including high valuations in the US, strong corporate earnings from European companies, and expectations ...Read more
Banking
Investors advised to prepare for central bank policy divergence, says deVere CEO
The Bank of England, European Central Bank (ECB), and US Federal Reserve are set to take different paths in their monetary policies, which will significantly impact investors around the world, ...Read more
