Micaela Fuchila of Bank of America supports the RBA’s decision to raise interest rates in November.

The Reserve Bank of Australia’s Vice President has supported raising interest rates at its meeting in November, stating that it “seems like the right thing to do.”

Micaela Fuchila stated in an interview with Business Weekend on Sky News Australia that she had previously believed that more rate increases would not be required, but that she had altered her mind after seeing the inflation numbers from the previous week.

According to data released by the Australian Bureau of Statistics, fuel costs increased by 7.2% and power prices increased by 4.2% during the September quarter, which caused inflation to climb more than anticipated.

According to Ms. Fuchila, who used “core inflation measures,” inflation looks to be holding steady, therefore the RBA would be justified in hiking rates if it thought more action was necessary to cool the economy.

“I was of the idea initially that it wasn’t necessary, that the RBA has done enough, but looking at the composition of inflation yesterday it seems like the right thing to do,” she stated.

“Inflation is still very robust at that level, according to core inflation estimates, which actually eliminate all of these volatile things.

“The RBA has a forecast, they are expecting inflation to reach 4.1 (per cent) by the end of the year, it’s not looking very likely.

“So we do expect them to hike the rate 25 basis points.”

The Bank of America economist’s view aligns with other experts, including some who have warned Australia could face two more hikes, as despite clear signs of slowing economic activity inflation continues to stay above the RBA’s two to three per cent target band.

Regarding the subject, bank governor Michele Bullock has been evasive, telling Senate estimates last week that “I wouldn’t go one way or the other” in response to a question about whether the strong ABS statistics would guarantee a rate increase.

The Governor did not change her position, however, stating that the RBA had a “low tolerance” for inflation to be above goal and that it was “fairly persistent” in the services sector.

However, Ms. Fuchila believed that the tightening cycle would come to an end if the RBA decided to hike rates once more in November since consumers “can’t handle” any more increases.

“We don’t think there’s any more scope to continue hikes, so they will have to really live with inflation above target for a bit longer,” she stated.

“The consumer is a big concern, consumers are continuing to be very weak and they really can’t handle any more.”

Due to severe inflation and sharp increases in interest rates, Australia’s consumer spending has drastically decreased over the last six months. Ms. Fuchila observed that both discretionary and non-discretionary spending have reached levels not seen since the COVID-19 epidemic.

She did, however, add that RBA research indicated Australians were still “resilient” to conditions getting worse, implying the bank could force through another hike and yet manage to keep the nation headed toward a soft landing.

Author: utdinfo_2ye1ln

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