• Clifford Bennett, Chief Economist at ACY


• 28.10.2021 01:00 pm
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ACY Securities, the Australian firm making it on the global stage.

CBA Joins ACY Forecast:

RBA to Raise Rates in 2022.

Good afternoon,

For the past two weeks, I have been pointing out the extreme damage being done to the long-term outlook for the Australian economy by a falling further behind the rest of the world Reserve Bank of Australia.

That the OECD has taken the extraordinary step of urging a major review of the RBA board and charter says it all.

While the Bank of Canada has ended its bond buying and several central banks have been rising rates for some time, the RBA bizarrely wants to stick to a ‘keep rates at historic crisis levels until 2024 no matter what’ policy? This is gross policy neglect by the Reserve Bank of Australia. How long will the Australian people allow our central bank to be inept?

The longer this goes on, the greater the damage being done in creating endless waves of volatility in the Australian economy for many years to come. Caused precisely by the current generation of asset market bubbles through their easy money settings, while allowing inflation to get out of hand at the same time. Every other central bank in the world understands all of this, except our badly in need of major performance review, Reserve Bank Australia.

So bad are their policy settings, that only one of two things can happen. Either they are belatedly prodded by external forces to radically change their policy, in an attempt to catch up with other central banks, or there will have to be a drastic review and sacking of the RBA board.

In either case, we see and forecast definite rate hikes, plural, in 2022, to at least 0.75%, and possibly as high as 1.25%. Because of the delayed start to returning rates to more normal levels, the eventual rate hike cycle will now have to be more aggressive than would otherwise have had to be the case. The RBA has already done considerable long-term damage.