The Reserve bank of Australia meets on Tuesday to decide whether to raise interest rates. Meanwhile, Governor Phillip Lowe is taking the heat over remarks relating to interest rates.
On 2 August 2022, the board will meet to decide the direction of interest rates, even though most analysts predict a 0.5% rise, our source within the RBA confirms a split with some members wanting a 0.75%.
The numbers within the board wanting a 0.75% rate increase are growing, this would be in line with the US move last week to increase rates by 0.75%, and with worse than expected inflation figures showing inflation increasing some members want to take a speed brake approach to slow spending.
Inflation rose to 6.1% during the last quarter exceeding expectations with most analysts expecting it to keep on increasing well over 7.0%.
This acceleration of inflation is one of the metrics causing members of the RBA to consider a 0.75% rise.
Meanwhile, the Governor of the RBA Phillip Lowe has come under intense fire over his remarks last year that interest rates should remain low until 2024. Many commentators are blaming him for the housing bubble and people taking on excessive debt in order to secure their Australian dream of owning a home.
However, the housing bubble is not the result of the RBA and can be traced back to the massive spending by both Federal and State governments during COVID. This printing of money has fueled the bubble that the RBA now has to deal with.
With most young families not able to enter the housing market and investors nervous over their ever-shrinking assets, the next rise will show us all whether the RBA is serious in tackling the inflation or whether investors are spared the extra repayment burden for another month or 2.
