RBA Cash Rate – Target Rate Increase by 0.25% to 2.50%

By Murray Nicol

The BKM Wealth and DFK Benjamin King Money teams didn’t predict that the RBA would increase their Cash Rate Target on Tuesday by 0.25% to 2.50%. We guessed either a 0.50% increase or no increase so the RBA could keep the rates steady. 

Murray Nicol, Financial Adviser at BKM Wealth believes “This is mirrored in some of the information and analysis following the ‘half way’ move by the RBA”

Murray comments, “It will be interesting to assess the impact of the RBA Cash Rate Target increases on Inflation for the September 2022 Quarter when it is released on 25th October. The Graph from the ABS last Inflation Survey is below and you can see the movement upward”

Murray further comments, “I’m worried that inflation and wage pressures in Australia are similar to other G10 economies and don’t warrant such a contrast to change from 0.50% rate increases. The risk behind Tuesday’s decision is that it eventually looks more like a detrimental delay, forcing the RBA to ‘chase’ higher than expected inflation and wage prints though a prolonged hiking cycle that stretches into 2023. This may increase the chances of Recession in Australia rather than taking a ‘rip the band aid off’ approach of getting to a ‘neutral level’ for the Cash Rate Target sooner rather than later.”

If you want further information and insight on the latest interest rate rises or any other financial planning matters please contact Murray Nicol or Grant McWhinney from BKM Wealth.