RBA meeting intervals have been extended to take place every 6 weeks, with 8, as opposed to 12, now occurring this year. It seems as though this, when combined with the fact that inflation has not reached its 2-3 per cent target yet, could place another interest rate rise on the table on February 6.

The meeting post-February will be held at the end of March, on 18-19th, so regardless of the CPI data for both months, the RBA will most likely call a rate rise to witness the effects of one potentially first and final increase for the first quarter of this year.

With a 6-week block at 4.60 per cent, and CPI likely to go down here, as well as in the US and UK at some stage over the next couple of months, we are looking at a good chance of it reaching 3 per cent in Australia, which could warrant a pause in March, or even an alleviation of 0.25 per cent if households are still struggling.

Attrition of inflation can be achieved via a pause, so the former is certainly an option that is well worth considering further down the track. If inflation reduces significantly elsewhere, dropping the cash rate temporarily could be the ideal for all, followed by the option of either a raise or a pause.

As the AUD/USD exchange rate is still lagging and not quite where it ought to be after a small resurgence, in my opinion the RBA will no doubt need another interest rate rise to help bring it back up so that it is closer to scratch and comfortably staying above 0.70.

With inflation not necessarily looking too sticky yet here in Australia, one could argue, however, that the exchange rate is starting to become slightly stuck. The danger of too low an exchange rate is that Australians have to pick up the slack for prices being relatively high in Australia and, whilst purchasing power here does not necessarily change, the value of exports goes down.

On the one hand this will pass, but on the other hand lies the interim, which is the cause of the pain households are experiencing, so leaving no stone unturned really should be the best option. This means that consideration ought to be given to the exchange rate. Either way now is a good time for the government to embark on trade deals.

As a 0.25 basis point rate rise would bring the cash rate up to 4.60, which will be higher than what is currently already the highest cash rate that there has been in Australia since 2011, 4.35; one rise in the quarter of this year ought to be enough to drill down inflation without the cause for another rise at the following RBA meeting. Data-dependent, this could even apply to the first half of 2024, but why not wait a little first, then decide?

With inflation not quite yet under 3 per cent in the US, we can most likely absorb the Fed funds rate decisions taken over the next few months, which will ensure that inflation is brought down to 2 per cent, then we can start to reduce the cash rate more not too late on here this year.

In the UK, CPI is down to its lowest since June 2022, sitting at 5.2 per cent, and, whilst there is still a way to go to reach 2-3 per cent, this steady decrease ought to bode well for our relatively late response to inflation here.

Why not consider a rate rise, then perhaps also a reduction? The cash rate could always be brought up again for 6 weeks in May.

Even in New Zealand, which printed the largest amount of money during the pandemic out of all four of these countries relative to its existing supply, the economy is slowly recovering and absorbing the benefits of having opened up its doors to tourism.

On that note, pack your bags; there are some great deals on flights to New Zealand at the moment, so don’t forget to book a holiday there this year!

‘Chance fights ever on the side of the prudent.’ – Euripides