The RBA’s perilous juggling act is just getting started

The Reserve Bank’s big interest rate shift this week marks a turning point for Australia.RBA has begun the long march away from extreme cash rate settings

Monetary policy takes about 12 to 18 months to have its full impact - what economists call the “lag” effect. So, the RBA will be feeling its way through the dark, raising interest rates in the near-term while trying to guess the impact of higher rates more than a year into the future.To be sure, there will be some real-time immediate evidence of higher rates on consumer spending, home borrowing and the stock market. But the full effect will not be known until well after the tightening occurs.

“It’s important to remember that interest rates are rising across the globe in response to higher inflation,” James says. “So the risks of policy mistakes are just not limited to Australia.”The first few interest rate increases by the RBA over the coming months will be relatively straightforward. National Australia bank tips further rate increases in June, July, August and November. Money market pricing is much more aggressive, betting on a 2.9 per cent cash rate by year-end and 3.6 per cent by mid-2023.

Unemployment is low and the RBA thinks wages are finally about to take off as employers compete harder to attract and retain scarce labour. Business investment is also picking up.

Bank executives will be over the moon , they can buy new holiday homes now with the interest we pay on our mortgages

Financial Review ANALYSIS: The RBA will be feeling its way through the dark, raising interest rates in the near-term while trying to guess the impact of higher rates more than a year into the future. But AlboMP should know, right off the top.

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Federal budget spending pushed interest rate move by RBA: EconomistsThe March 29 budget contained billions of cost-of-living handouts while the campaign has included billions more. Economists say they helped push the RBA to act. auspol AusVotes2022
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Federal budget spending pushed interest rate move by RBA: EconomistsCost-of-living spending in the federal budget “100 per cent” helped pull forward the Reserve Bank’s decision to increase official interest rates, economists say | swrighteconomy swrighteconomy Despite Covid, rising inflation and the Ukraine crisis, Germany will soon introduce a monthly ticket for all local transport (Nationwide) of €9, why doesn't Third Country Britain do the same then? swrighteconomy Liberals are out-pork barrelling Labor 10:1. So your bothsidesism is biased bullshit. auspol swrighteconomy Extremely unlikely, given inflationary pressures globally, Aus fiscal policy is a mere bagatelle *at this stage* But then the main economist quoted has a lot of form for gobbing off for political reasons. Perhaps go elsewhere for comment
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