Future RBA interest rate hikes "finely balanced", and here are 3 other risks to Australia

<p>A note via Westpac's new Chief Economist, Luci Ellis. </p><p>Luci Ellis was previously the Assistant Governor (Economic) at the Reserve Bank of Australia, a position she held since December 2016. news of her departure from the Bank crossed in July. </p><p>Ellis has issued a note saying the outlook for the future path of RBA cash rate policy is finely balanced:</p><ul><li>Further rate increases are not completely off the table, but only if the inflation outlook changes materially from here.
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Our core view is that CPI will continue to track lower and return to the RBA’s 2-3 per cent target band in 2025, a similar timeline to the central bank’s own expectations. </li></ul><p>Ellis then goes on to outline "a number of broader risks to the economy and inflation outlook that we’re keeping a close eye on". In brief:</p><p>1. Housing prices are back close to the peaks we saw pre-pandemic.:</p><ul><li>matters because positive wealth effects can boost household spending and add some upside risk to domestic demand and so inflation. </li></ul><p>2. Global rise in bond yields:</p><ul><li>If global fiscal policy turns out to be more expansionary than in the post-GFC period, central banks will have to do more to mop up the extra demand. If that is the case, interest rates globally could be higher on average than they otherwise would be</li></ul><p>3. China’s recovery from a prolonged period of COVID-related lockdowns was slower than expected. </p><p><a href="https://www.westpac.com.au/news/money-matters/2023/10/rba-policy-outlook-three-key-risks-to-watch/" target="_blank" rel="nofollow">Full piece is here. </a></p><p>Ellis with ex-governor Lowe</p>

This article was written by Eamonn Sheridan at www.forexlive.com.