RBA Governor Dr. Philip Lowe’s inflation warning

dr. Philip Lowe predicted that inflation would hit seven percent by Christmas and would not begin to decline until the first quarter of the following year.

Australian families are in for a year of misery, with the Reserve Bank governor warning that interest rates will rise and inflation could reach seven percent.

dr. Philip Lowe predicted that inflation would hit seven percent by Christmas and would not begin to decline until the first quarter of the following year.

He added that the RBA would do “whatever it takes” to tackle rising inflation and that the bank was determined to bring inflation down to between two and three percent.

“It’s unclear at this point how far interest rates need to rise to get that,” said Dr. Lowe at ABC’s 7:30 a.m.

“I’m convinced that inflation will come down over time, but we’re going to have to have higher interest rates to get that result.”

dr. Lowe admitted that Australian families would find the rise in interest rates difficult to accept, especially at a time when food and fuel prices are rising astronomically.

Last October, the RBA said that interest rates would not rise until 2024 just because the spot rate would increase by 0.5% last week.

“On an individual level, some people have taken out loans that they may not have wanted to take out in retrospect, but the overall picture, which is really the focus of the Reserve Bank, is a pretty resilient economy,” said Dr. lowe.

“Sometimes my comments are interpreted as if I made a promise, or a very strong statement, that interest rates would stay where they were until 2024. In our own communication, in our own mindset, it was a very conditional statement.

“The economy has not evolved as we expected, it has been much more resilient and inflation has been higher and we thought we had to respond to that.”

dr. Lowe now believes inflation will peak at around seven percent in December this year, “and by the time we get to the second half of next year, inflation will fall markedly.”

Despite all the doom and gloom, the RBA governor insisted that the Australian economy will grow “quite strongly” over the coming year as spending increases due to the Covid pandemic.

In the meantime, “people have their savings to draw on,” he said.

“Even if income growth is somewhat weaker, people have the financial capacity to continue spending.

“There is a significant backlog of containment work and the number of vacancies is exceptionally high.

“People can trust that the jobs will be there and that people in that environment will continue to spend.”

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