Australia’s central bank again dismisses calls for 2022 rate hike

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SYDNEY (Businesshala) – Australia’s top central banker has pushed back again against market bets to raise interest rates next year, arguing that domestic inflation may well be behind the spikes seen in some other developed countries. was likely to lag behind.

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Speaking on Tuesday, Reserve Bank of Australia (RBA) Governor Philip Lowe said inflation in Australia was starting at a lower point than many counterparts and that there was a lot of inertia in the wage system.

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“The latest data and forecasts do not guarantee a cash rate increase in 2022,” Lowe said, taking issue with market pricing for an increase as early as June.

“The economy and inflation will have to be very different from our central scenario for the board to consider raising interest rates next year.”

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Minutes of the RBA’s November policy meeting on Tuesday showed that the board felt the risk on inflation has shifted upward, but the central issue was still no rate hike until 2024.

Markets are betting on at least three hikes next year, largely reflecting inflationary pressures globally, and particularly in the United States.

Still, Lowe insisted that Australia’s circumstances were different. While core inflation rose to 2.1% in the third quarter, taking it within the RBA’s target band of 2-3% for the first time in six years.

Crucially, there was no sign of a broad-based increase in wage growth, as was seen in the United States, Lowe said.

Participation in the local labor market was still not far from record highs and the wage-fixing system only led to a gradual increase over time.

“Our business liaison shows that most businesses maintain a strong cost control mindset and are seeking to use measures other than raising base pay to attract and retain employees,” he said.

Reporting by Wayne Cole; Editing by Sri Navaratnam

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