Calls have begun to grow for the board of the Reserve Bank of Australia and its governor, Phillip Lowe to resign after making a number of errors, sparking fears of a recession.
The calls come as the RBA has announced they will lift interest rates by yet another 50 basis points, to 1.85 per cent.
Among the RBA’s missteps was a “misleading” promise to borrowers to keep interest rates from rising until 2024, instead, the bank has made a series of rapid rate rises in four consecutive months.
Economists have shown concern that the rapid increases have the potential to cause a recession while inflation continues to soar.
Chief economist at ANZ and Credit Suisse and former principal adviser to the federal Treasury, Warren Hogan, said the RBA had made “pretty bad errors”, providing guidance that was “misleading people,” and that the bank had taken “too much insurance” during the pandemic.
“They threw the kitchen sink at it and they lost their risk management skills,” he said. “It’s unforgivable. I think they should resign — the whole board.”
Hogan said Lowe “should have the character to stand down.
With the last rate rise on July 5, Lowe said the RBA’s decision demonstrates that “the Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time”.
“Today’s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic. The resilience of the economy and the higher inflation mean that this extraordinary support is no longer needed,” he said.
“Inflation is forecast to peak later this year and then decline back towards the 2–3 per cent range next year. As global supply-side problems continue to ease and commodity prices stabilise, even if at a high level, inflation is expected to moderate.
“Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services. Medium-term inflation expectations remain well anchored and it is important that this remains the case. A full set of updated forecasts will be published next month following the release of the June quarter CPI.”
At its meeting today, the Board decided to increase the cash rate target by 50 basis points to 1.35 per cent. It also increased the interest rate on Exchange Settlement balances by 50 basis points to 1.25 per cent – https://t.co/QwoeT6U8OD
— RBA (@RBAInfo) July 5, 2022
Despite all the doom and gloom being bandied around regarding the increase, REA Group senior economist Eleanor Creagh told Newscorp that retirees and those who have substantial savings squirrelled away could stand to benefit from the RBA’s decision.
“With interest rates rising, retirees and savers can benefit from increased return on their savings,” she said.