the end of stimulus measures such as HomeBuilder, tightening of mortgage assessments as well as increased supply in the market. This, according to economists, is putting pressure on the Reserve Bank of Australia to raise the cash rate from its historic low of 0.1 per cent.
Previously, the central bank repeatedly said that an increase its official cash rate was unlikely to take place before 2024. However, with the economy beginning to recover from the pandemic and price inflation having picked up sooner than anticipated, the central bank has now decided to leave the door open for a rate hike earlier than projected.
“The RBA won’t rush into a rate hike because it wants to see that ‘inflation is sustainably within the target range’,” AMP Capital chief economist Shane Oliver said. “However, with the economy recovering, we believe that the conditions for the start of rate hikes will now be in place by late 2022, so we expect the first hike to be in November 2022, taking the cash rate to 0.25 per cent, followed by a 0.25 per cent hike in December 2022, taking the cash rate to 0.5 per cent by the end of next year.”
