I think the 50 percentage point rises are probably over for now [in Australia].
But you’ve got two lags going on.
Firstly, it takes several months for a rise to feed through to your mortgage. So given they only started in May, the full impact of rate rises won’t be felt until the end of the year around Christmas.
The RBA will probably do two more 25s this year. They might put a third in up to 3.1%, but let’s call it 3%.
I think then they’ll sit back and see what impact it’s had.
Of course in 2023 you’re going to see a lot of fixed-rate mortgages rolling into floating rates, so there’s a hell of a lot of tightening yet to happen.
Secondly, on the goods inflation side there’s a huge amount of evidence that we’ve seen the peak in the US. There’s every chance we’ll get some negative CPI US prints.
This doesn’t mean inflation’s over. It doesn’t mean they’re going to cut rates, but that certainly takes the pressure off for hiking rates.
Tim Hext is a Pendal portfolio manager and head of government bond strategies in our Income and Fixed Interest team.
Tim has extensive experience in banking, financial markets and funding including senior positions with NSW Treasury Corporation (TCorp), Westpac Treasury, Commonwealth Bank of Australia, Deutsche Bank, Bain & Co and Swiss Bank Corporation.
Pendal’s Income and Fixed Interest boutique is one of the most experienced and well-regarded fixed income teams in Australia.
The team won Lonsec’s Active Fixed Income Fund of the Year award in 2021 and Zenith’s Australian Fixed Interest award in 2020.
Pendal is an independent, global investment management business focused on delivering superior investment returns for our clients through active management.
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