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Consumer inflation expectations have increased amid a spike in geopolitical uncertainty.
The latest ANZ-Roy Morgan Australian Consumer Confidence survey showed confidence has declined to its weakest level since July 2023. In addition, inflation expectations recorded their largest weekly rise since the survey integrated this question weekly in 2014, and sit at their highest point since November 2022.
Speaking to ANZ Institutional Insights on video, ANZ Senior Economist Adelaide Timbrell said the Reserve Bank of Australia would keep a close eye on any data of this kind as it considers its next moves on rates.
“The Reserve Bank have noted that they are looking closely at inflation expectations when they think about what the right next step is for interest rates,” she said.
The RBA will make its next decision on rates on March 17.
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In February, the Reserve Bank of Australia hiked interest rates by 25 basis points to 3.85 per cent, in line with market expectations. ANZ Research expects a similar move in May.
“We at ANZ research expect to see an additional hike in [the cash rate], in May, of 25 basis points,” Timbrell said. “This will increase the cash rate to 4.1 per cent, after which we think that they will leave it at that rate for quite some time in order to allow inflation to settle down.”
The latest ANZ-Roy Morgan survey showed consumer confidence has fallen 3.7 points to 73.4 points, well below the neutral level of 100. The four-week moving average is down 0.9 points to 77.0 points.
The ‘weekly inflation expectations’ elements of the survey rose 0.8 percentage points, while the four-week moving average lifted 0.3 percentage points.
Among key subindices, household confidence in financial conditions over the coming year remains at its lowest level on record.
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