The Reserve Bank is deadly serious about maintaining the welfare of all Australians, but it's also deadly serious about anchoring inflation and it won't stop until that's achieved, writes David Taylor.
It's considered the most objective, fair way of enacting change that can leave some better or worse off.
History shows renters also cop rental price increases, as landlords still paying off their mortgage pass on the added financing costs to their tenants. "The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income," RBA governor Michele Bullock said following the October board meeting.The Reserve Bank's latest Financial Stability review pointed to roughly 50,000 households at risk of drawing down all of their savings by March next year.
The bottom line is that, and lean in for this one, the "trajectory" of inflation needs to be on course with what the RBA has forecast.Based on these quarterly inflation numbers, the Reserve Bank believes annual inflation will return to between 2 and 3 per cent by the end of 2025. Simply put, once the wider community loses faith that steep price increases at the shops will eventually stop, managing inflation becomes extremely challenging.
"This may just be jawboning and an effort by the new governor to highlight that she is just as determined to get inflation down as Governor Philip Lowe and so is all aimed at keeping long-term inflation expectations down.
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