28 Jun Oliver’s Insights – Should the RBA raise rates to prepare households for higher global rates?
The key points are as follows:
- The RBA should avoid calls to raise interest rates prematurely just to prepare households for higher global rates. Such a move would be Iike shooting yourself in the foot in order to practice going to the hospital.
- Nor should the RBA mess with the inflation target that has served Australia well.
- We don’t see it doing either and continue to see interest rates on hold out to 2020 at least and can’t rule out the next move in rates being a cut.
- This will mean term deposit rates will stay low, search for yield activity will still help yield sensitive unlisted investments (albeit it’s waning) and an on-hold RBA with a tightening Fed is likely to mean ongoing downward pressure on the Australian dollar.