Australian Breaking News: The Reserve Bank’s second-in-command has given households hoping for a reprieve from some very frank advice. Price pressures are cooling Although news came last week that prices growth has moderated slightly, Deputy Governor Andrew Hauser cautions it’s too early to let the champagne corks pop. In the latest update leading up to February’s eagerly anticipated board meeting, the RBA made it clear that while inflation was heading in the right direction, it was still proving stubbornly high compared with its official target.
Inflation Data Does Not Alter Bank Policy
The rate of price increases slowed to 3.4% on an annual basis in November, down from 3.8% a month earlier, recent data show. Though many economists had taken the data as a hopeful sign of progress, Andrew Hauser called the numbers “broadly as we expected” and not sufficient to alter the bank’s tough stance. He stressed it is the Reserve Bank’s purpose to take that number back down to between 2% and 3%, and until this occurs, expect the price of borrowing to remain elevated.
The central bank is mindful of the “pain and difficulty” that has resulted from lately elevated living costs and it doesn’t want to see a repeat. Mr. Hauser said even though the headline numbers look good, some costs, such as housing and rent, are continuing to rise quite rapidly.
Focus On February Meeting For Mortgages
All eyes are now on February 3 when the Reserve Bank board meets for the first time in 2026. Financial markets are currently divided on what comes next, with some experts indicating that the bank may need to keep rates where they are for now and others even suggesting that a small increase in “fine tuning” might be needed. Recent comments from Mr. Hauser have solidified the impression that the “last rate cut” of this cycle has already occurred and borrowers shouldn’t expect rates to decline again any time soon.
There’s one remaining piece of the puzzle that the bank is waiting on: the December quarter inflation report, which is to be released at end-January. This information will enable the board to see how much families spent over Christmas and whether the Black Friday sales actually contributed to a reduction in cost of living. Until that report comes, the bank is on high alert and ready to act if prices don’t come down quickly enough.
Global Risks And The Path To Recovery
Outside Australia’s borders, the Reserve Bank is also closely watching several major world developments that could whack the local economy. Mr. Hauser added that 2026 looks like it’s going to be just as tough as last year, citing new “geopolitical pressures,” such as the recent U.S. intervention in Venezuela. Events like that have the power to send global markets all over the place, but they can also produce shocks, for instance, everything gets cheaper if oil production abroad ratchets even a bit higher than expected.
Indeed, while the world presents some wildcards it comes down to the RBA’s outlook for in one or two years’ time. The bank’s mission is to balance the demand for secure jobs with the need for stable prices. A little more than a month before the February meeting, the message remains straightforward: The recovery is still a long ways off and the bank won’t hesitate to keep interest rates tight as long as needed to win the war on inflation.
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