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Interest rate pause still months away, economists warn

Despite a softening of language from the RBA, economists are still tipping another rate rise when the central bank next meets.

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March 13, 2023
By Andrew Brown
13 March 2023

Leading economists have predicted successive interest rate rises on the cards for coming months, despite a softening of language from the Reserve Bank’s governor.

The Reserve Bank lifted the official cash rate to 3.6 per cent last week, the 10th month in a row interest rates have risen.

While the bank’s governor Philip Lowe indicated a pause on interest rates was possible, Westpac’s chief economist Bill Evans said it was unlikely it would take place.

Mr Evans said a further two rate hikes were on the cards in both April and May.

He indicated upcoming unemployment and inflation figures would be too uncertain to predict to say for sure an interest rate pause was likely.

“There is ample evidence that the governor favours a pause in April but the task is reliant on a series of volatile data reports and overseas developments,” Mr Evans said.

“The employment and monthly inflation indicators are both volatile particularly in the first two months of the year due to changing seasonal patterns.”

Dr Lowe said a pause on rates would occur if collective data suggested it was the right thing to do.

Economists are predicting a recovery in jobs figures during February, following the unexpected loss of 11,500 jobs from the market in January.

Commonwealth Bank economists expect to see 45,000 jobs added to the economy when the data is released on Thursday with the jobless rate holding firm at 3.70 per cent and the participation rate lifting a touch from 66.5 per cent to 66.6 per cent. 

Economists from JP Morgan said the jobs data would take on extra significance given the looming interest rates decision.

“We forecast the jobless rate to tick marginally lower to 3.6 per cent, an improvement from the prior month but still two-tenths above the 2022 low,” the forecast said.

“We expect another 25 basis point hike next month, though there remains a risk that this is held back to May, after the CPI report.”

The Australian Bureau of Statistics will also release its monthly business turnover and household spending indicator on Tuesday.

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