Central Victorians are being told they might have to cough-up a little more to pay-off their mortgage.
That forecast comes from Bendigo Bank, which released its latest Economic Update this week.
The report predicts the Reserve Bank of Australia (RBA) will raise the cash rate in May, due to high inflation and a strong jobs market.
According to Bendigo Bank’s chief economist, David Robertson, January’s Consumer Price Index – which measures inflation – was still at an “uncomfortably high” level of 3.8 percent in January, well above the RBA’s target of between two and three percent.
“The latest jobs data makes May the most likely timing for the next cash rate rise in 2026 but confirms we are likely heading into a drawn-out tightening cycle, into 2027,” Mr Robertson added.
“Unemployment fell to 4.1 percent in trend terms in January, and recent RBA comments on labour markets have noted that conditions are stronger than expected, adding to capacity pressures.
“The next two jobs reports, out on March 19 and April 16, will therefore be important for the May RBA cash rate decision, assuming they remain on-hold in March.”
The report also suggests the current conflict in the Middle East could influence the cash rate.
“The US and Israeli strikes and the Iranian retaliation are adding dimension to recent volatility in financial markets,” Mr Robertson said.
“The global macro and market implications of the attacks depend primarily on how long the conflict lasts, and crucially, on how long the Strait of Hormuz remains closed, this being a vital artery for global energy flows.
“The price of oil was already rising ahead of the weekend’s military strikes, but rose a further 20 percent as events became more complex this week, reaffirming fears that a prolonged conflict could see further upside risks to energy prices.
“Though Australia is a net energy exporter, the prospect of these likely higher oil and commodity prices does add to inflationary risks for us.”
Australia’s cash rate currently sits at 3.85% after being raised by 25 basis points last month.
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