Australian borrowers were spared a rate hike for the first time in a year, but the relief is likely to be short-lived as inflation is still too high.
The Reserve Bank of Australia left the pending cash rate at an 11-year high of 3.6%, marking the first pause since April 2022 – but Governor Philip Lowe hinted another rate hike was likely .
This month’s pause followed 10 consecutive monthly interest rate hikes, the most severe pace of monetary policy tightening since the RBA’s cash rate target era began in 1990.
Dr Lowe acknowledged that the full effects of previous rate hikes are yet to be felt, noting that the RBA needs to look at the effects of an economic downturn.
“The board recognizes that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates has yet to be felt,” he said.
“The board has taken the decision to keep interest rates stable this month in order to have more time to assess the impact of the interest rate increase to date and the economic outlook.”
Australians have been spared a rate hike for the first time in a year, but the relief will likely be short-lived
Inflation has moderated from a 32-year high of 7.8% last year, with February’s monthly measure posting a consumer price index of 6.8%.
But this measure, from the Australian Bureau of Statistics, is still well above the RBA’s 2-3% target.
The board expects further monetary policy tightening to be needed to ensure that inflation returns to target.
Dr Lowe hinted at a further rate hike, with inflation not expected to return to the target range until mid-2025.
“The board expects that further monetary policy tightening will be needed to ensure inflation returns to target,” he said.
“The central forecast is that inflation will decline this year and next, to around 3% by mid-2025.”
The RBA noted that inflation was slowing in Australia due to easing global supply pressures and slowing local demand.
“Goods price inflation is expected to moderate over the coming months due to global developments and weaker demand in Australia,” Dr Lowe said.
RBA Governor Philip Lowe acknowledged that the full effects of previous rate hikes are yet to be felt, noting that the effects of an economic downturn need to be considered. But he also hinted at another rate hike (he is pictured at Boonie Doon Golf Club in Sydney)
Commonwealth Bank and Westpac both correctly predicted a break in April, but expect another 0.25 percentage point rate hike in May, which would take the cash rate to 3.85%.
Another rate hike means a borrower with an average mortgage of $600,000 would see their monthly repayments jump $95 to $3,472, up from $3,377 previously.
Annual repayments on a typical loan have already increased by $12,852 since rate hikes began in May, ending the era of the record 0.1% cash rate.
On top of that, Australia’s 880,000 fixed rate mortgage borrowers face steep increases as their ultra-low 2% fixed rate loan terms expire in the coming months, which will force many them to ‘come back’ at variable rates of more than seven per cent.
Tim Lawless, research director at real estate data group CoreLogic, said the end of rate hikes was likely to trigger a recovery in the housing market as consumer sentiment improves.
“An increased level of certainty around the rate hike cycle should translate into improved consumer sentiment, which has remained stuck at levels seen at the height of the global financial crisis and the onset of the pandemic,” he said. he declares.
“We know that consumer sentiment and housing market activity are closely linked, so any upward movement in spirits could see more buyers and sellers returning to the market, although we need to see the sentiment increase significantly before returning to average levels.”
The Australian Securities Exchange’s 30-day interbank cash rate futures market had predicted the RBA would stop raising rates, ahead of Tuesday’s announcement.
The Reserve Bank of Australia left the cash on hold rate at an 11-year high of 3.6%, marking the first break since April 2022 (pictured is a stock image)
The Australian Securities Exchange’s 30-day interbank cash rate futures market had predicted the RBA would stop raising rates, ahead of Tuesday’s announcement
- Mitch Blacher ABC7, NBC10, Bio, Age, Wife, Family, Height, Salary
- I don’t like the way Olamide and Asake top the leaderboard – Odumodublvck
- Aritzia doesn’t have private mirrors in its dressing rooms, and a lot of people don’t like it
- Rosemary Connors NBC, Bio, Age, Twin Brother, Husband, Baby
- John Farley Bio, Wiki, Age, Family, WOLO-TV, Wife, Salary, and Net Worth