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First hint of RBA relief looming



The Reserve Bank of Australia (RBA) could bring its record-breaking run of interest rate hikes to an end in April as the entire financial industry is rocked by instability.

Yesterday Australia's unemployment rate fell to 3.5 per cent in the wake of a falling monthly inflation indicator, generally showing a stronger economy.

But news of Credit Suisse being forced to borrow billions to keep the doors open, along with the collapse of the Silicon Valley Bank and Signature Bank has some economists tipping that Australia's central bank will hold on its course of rate hiking.

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Senior economist at AMP Australia Diana Mousina said there was "some chance" that Governor Philip Lowe and the board would hike rates in April, but they were not expecting it.

"Panic in markets over the past week around the risks to bank liquidity after the collapse of three regional US lenders and current worries around Europe's Credit Suisse bank shows that impacts of central banks rate hikes are increasing financial stability risks given the fast upward moves in rates over the past year and contagion risks remain high for now," Mousina wrote.

"Additionally, we think the February retail and inflation data in two week's time will also disappoint expectations.

"Our base case is that the RBA will keep the cash rate unchanged in April at 3.6 per cent and see the central bank maintaining the cash rate at this level before the risk of rate cuts in late 2023/early 2024."

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Currently the cash rate target of 3.6 per cent is the highest since May 2012, after the RBA hiked interest rates for 10 consecutive meetings.

Governor Lowe cited persistent inflation – currently sitting above 7 per cent – as the primary driver of the bank's decision to continue lifting rates.

The RBA has consistently said it intends to return inflation to between 2 and 3 per cent.

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