Monday 27 June 2022 12:51 AM Reserve Bank of Australia governor Philip Lowe tells Zürich panel inflation ... trends now Australia's most powerful banker has hinted interest rates will rise sharply in coming months but won't go as high as financial markets are expecting. Reserve Bank of Australia governor Philip Lowe told a Friday night inflation discussion in Zurich, moderated by Swiss bank UBS, that while inflation was likely to keep climbing, it would start moderating in 2023 as Covid and computer chip supply constraints were resolved. 'We have reasonable confidence that inflation will start trending lower next year,' he said. 'The problems in the global economy from Covid are gradually being resolved. 'That's not to say we mightn't get hit by another shock.' Reserve Bank of Australia governor Philip Lowe told a Friday night inflation discussion in Zurich, moderated by Swiss bank UBS, that while inflation was likely to keep climbing, it would start moderating in 2023 as Covid and computer chip supply constraints were resolved The Commonwealth Bank and Westpac are both expecting the RBA to raise the cash rate by another 0.5 percentage points in July - to 1.35 per cent from 0.85 per cent. New Commonwealth Bank forecasts on RBA cash rate JULY: Up 0.5 percentage points to 1.35 per cent AUGUST: Up 0.25 percentage points to 1.6 per cent SEPTEMBER: Up 0.25 percentage points to 1.85 per cent NOVEMBER: Up 0.25 percentage points to 2.1 per cent Advertisement A half a percentage point increase next Tuesday would see a borrower with an average, $600,000 home loan pay another $165 a month on their mortgage repayments, as their variable rate rose to 3.54 per cent from 3.04 per cent. Westpac is expecting the cash rate to hit 2.35 per cent by February next year but financial markets are even more worried, forecasting a 3.1 per cent cash rate by Christmas. The RBA's 0.5 percentage point increase in June was the biggest monthly increase since February 2000. This took the cash rate to 0.85 per cent - the highest since October 2019 before the pandemic. This followed the May rise of 0.25 percentage points which was the first increase since November 2010 - ending the era of the record-low 0.1 per cent cash rate. Dr Lowe this month suggested inflation was likely to hit seven per cent by the end of 2022, reaching a level last seen in 1990. The RBA chief told the Zurich panel discussion inflation was likely to keep rising from its present level of 5.1 per cent - itself the highest since 2001 - as the temporary, six-month halving of fuel excise to 22.1 cents a litre ended in September. Westpac is expecting the cash rate to hit 2.35 per cent by February next year but financial markets are even more worried, forecasting a 3.1 per cent cash rate by Christmas Treasurer Jim Chalmers is also set to deliver his first budget in October, giving relief to consumers - just seven months after his Liberal predecessor Josh Frydenberg delivered a pre-election budget. Westpac upgrades rate rise forecasts JULY: Up 0.5 percentage points to 1.35 per cent AUGUST: Up 0.25 percentage points to 1.6 per cent NOVEMBER: Up 0.25 percentage points to 1.85 per cent DECEMBER: Up 0.25 percentage points to 2.1 per cent FEBRUARY: Up 0.25 percentage points to 2.35 per cent Advertisement Dr Lowe said inflation was likely to peak at the end of 2022, predicting the budget will have some effect, with the treasurer hinting the halving of the fuel excise won't continue. 'Year-ended rate of inflation in the December quarter will be boosted by some government decisions,' he said. 'We've had a temporary relief from some taxes: that goes away in the December quarter, that's going to boost the year-ended number.' But the Reserve Bank chief doubled down on his fear of a wage price spiral as unions and workers pushed for higher wages to compensate for higher inflation. 'The willingness of firms to put their prices up has increased, and the willingness of labour to link wage increases to inflation has also increased,' Dr Lowe said. 'The whole psychology of businesses putting prices up has shifted and there's also been a shift in the psychology in the labour market. 'Now there's a very strong focus, at least in parts of the labour market, of getting full compensation for higher inflation. ACTU secretary Sally McManus last week slammed the RBA boss for suggesting a 1970s-style wage-price spiral was possible. 'The 1970s price spiral is a total boomer fantasy,' she told ABC radio 'You can understand why people faced with high inflation want compensation for it, especially when the unemployment rate is as low as it is.' ACTU secretary Sally McManus last week slammed the RBA boss for suggesting a 1970s-style wage-price spiral was possible. 'The 1970s price spiral is a total boomer fantasy,' she told ABC radio. 'It's been used by a whole lot of employers to say no, you can't have pay increases or demanded wage increases for workers.' The Fair Work Commission has this month rewarded minimum wage workers with a 5.2 per cent wage increase, the most generous in 16 years at and a level slightly above inflation. How much YOU could be paying on your mortgage by Christmas $500,000: Up $485 from $1,987 to $2,472 $600,000: Up $582 from $2,384 to $2,966 $700,000: Up $679 from $2,781 to $3,460 $800,000: Up $777 from $3,178 to $3,955 $900,000: Up $874 from $3,575 to $4,449 $1,000,000: Up $970 from $3,973 to $4,943 The monthly repayment calculations are based on a typical Commonwealth Bank variable rate rising from 2.54 per cent to 4.29 per cent in line with the cash rate moving from 0.35 per cent to 2.1 per cent. Figures related to banks before they adjusted to new 0.85 per cent cash rate this month Advertisement All rights reserved for this news site (dailymail) and under his responsibility