RBA chief Philip Lowe will not change his steely inflationary resolve

Tuesday’s RBA monetary policy statement is now being dissected by markets and economists for clues as to how it views the course and timing of interest rate moves.

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Before Tuesday’s decision, the RBA had made it clear that there would be at least two more rate hikes this year.

The slightly softer stance the RBA issued on Tuesday and Lowe’s hints on Wednesday The Australian Financial Report Economic peaks that the end of the tightening cycle is in sight give a glimmer of hope that there may be just another quarter of a point before a pause occurs.

However, many experts are still predicting two more rate hikes for the remainder of this year.

And a pause in rate hikes does not necessarily mean the end of the rate hike cycle. It might just be a breather to show the RBA the impact of the first 10 hikes on jobs, spending and the broader economy.

Mortgage repayments as a percentage of household income are already close to record levels. While the current interest rate level is nowhere near the level it used to be, household balance sheets are in a much more precarious state today.

Also, the speed of rate hikes is testing records.

The 350 basis point rise in the federal funds rate in the 11 months since rate hikes began in May now clearly outperforms any rate-hike cycle since 1990. It is the fastest tightening since the 10.6 percent rise to 18.2 percent between January 1988 and November 1989, according to AMP chief economist Shane Oliver.

Of course, household debt as a percentage of income was only 68 percent then, compared to 188 percent now, so interest rates shouldn’t need to rise nearly as much as they did in the 1980s to slow spending and thereby inflation. says Oliver.

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As a nation that borrows primarily at variable rates, our finances are particularly sensitive to interest rate movements.

Both Oliver and Deloitte economists are among a growing group of experts urging the RBA to hold back on further rate hikes.

The RBA’s latest hike – despite inflation and the economy slowing – brings the benchmark interest rate to 3.6 percent, putting further pressure on Australians while increasing the likelihood of an unnecessary recession, said Pradeep Philip, chief executive of Deloitte Access to Economics.

Oliver argued that “the impact of interest rate hikes and pressure on the cost of living on the key group of 25-45 year old households is now horrendous”.

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“Put simply, household debt service payments are now at their highest level in more than a decade, and a rise in the cash rate to 4.1 percent, as many are predicting, will push household debt service payments to record levels relative to disposable household income .”

The RBA might not be swayed by a visit to Lifeline, but the opinions of respected economists are hard to ignore.

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