OPINION: The narrow path to outgoing RBA governor Philip Lowe’s soft landing is firmly in view after Wednesday’s softer-than-expected inflation print. But what comes next?
Miraculously, the narrow path to outgoing Reserve Bank governor Philip Lowe’s soft landing is firmly in view after Wednesday’s softer-than-expected inflation print., and underlying inflation has fallen to 5.9 per cent, from 6.6 per cent in the March quarter.
It’s also important to remember that falling inflation is a sign the economy is cooling, albeit in a way that is not leading to the job losses that would threaten deeper economic problems. And given the accepted wisdom that rates work on a lag of 12- to 18-months, the slowdown is logically closer to the start than the end.
Danieli’s view is that lenders need to get comfortable that borrowers can service their debt at peak levels for 18 months before they will get any reprieve in the form of lower rates. That seems a reasonable base case for households, investors and businesses.
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