The Reserve Bank of Australia (RBA) boss, Dr Lowe, has acknowledged that an interest rate rise in 2022 is plausible.
Interest rate rise gets closer
The RBA Governor, Dr Lowe, was talking at the National Press Club in Sydney.
According to reporting by the Australian Financial Review, he acknowledged that it’s possible that interest rates do increase in Australia later this year. He said:
The faster progress towards full employment and inflation consistent with the target does bring forward the timing of the likely increase in interest rates.
We should welcome that. Whether it happens this year or not remains to be determined. It will depend on how the supply issues are resolved and the strength in the pick-up in labour costs. If things go well and the economy performs strongly, there’s clearly scenarios where we’ll be increasing rates later this year and some of these uncertainties get resolved, but time will tell.
It’s certainly a plausible scenario rates go up later this year, but there are a lot of other scenarios as well. There are a lot of uncertainties both on the supply side and in the labour market.
He went on to say that if inflation does pick up and doesn’t come down then the RBA would have to increase interest rates more quickly.
What to make of this
Interest rates have played a significant role in the volatility that we’ve seen since the start of 2022. For some ASX shares, the declines started in November 2021.
When could those 2022 interest rate hikes start? Well, the Commonwealth Bank of Australia (ASX: CBA) head of economics, Gareth Aird, said that the bank expects inflation, wages and labour market data will be sufficiently strong over coming quarters for the RBA to increase the interest rate in August 2022, according to the AFR.
With inflation and unemployment being stronger that than the RBA was expecting, most of the ingredients are already present for an interest rate raise this year. There are plenty of ASX growth shares and ASX dividend shares that I’ve got my eyes on in this volatility. Hopefully I can snap up a few bargains this month.
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