Multiple rate hikes needed to combat inflation, says Warren Hogan | The Business | ABC NEWS
Financial markets are pricing in a fifth Reserve Bank interest rate hike on Melbourne Cup Day.
Worse-than-expected inflation data last week all but sealed the deal on extra mortgage pain for borrowers and it’s still unclear how high interest rates need to rise for the Reserve Bank to achieve its inflation target of 2.5 per cent.
Judo Bank economic advisor Warren Hogan says interest rates may actually be too low to effectively combat inflation and he’s forecasting further hikes in 2027.
“The reality for the Reserve Bank Board is that they do have a mandate to not only keep unemployment as low as possible, but to keep inflation under control, and they have not been meeting that mandate for almost five years now,” he says.
His forecast is for two further rate hikes in the first half of next year, “after the assumed one we get this week”.
“I don’t think there’s a mortgage holder in the country that won’t tell you that monetary policy is not restrictive and that’s a legitimate perspective, but not enough to bring inflation in … Either way you look at it, the economy’s not getting inflation down and of course unemployment’s crept up, but it’s still extremely low by any standard in the last 50 years.”
Under a worse-case-scenario, Mr Hogan, warns six more interest rate hikes may be necessary, taking the cash rate beyond 6 per cent.
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