

For the third consecutive month, the Reserve Bank of Australia has decided to leave the cash rate on hold at 4.10% at their monthly board meeting. This marks the fourth time the RBA has paused its rate-hiking since May 2022, and the highest level recorded since April 2012.
“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” stated RBA Governor Philip Lowe following the meeting.
“In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month. This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.”
The RBA has increased interest rates by 4 percentage points since May 2022, putting pressure on variable borrowers repaying their monthly mortgage repayments. This pause will give borrowers a much-needed breather and time to catch up on these repayments.
According to RateCity, the average borrower with a $500,000 loan before the hikes began in May 2022 could soon be paying a total of $1,134 more a month. This is a 49% increase.
In his statement, Governor Lowe recognises that high inflation damages the economy's functioning and makes life difficult for everyone.
“Returning inflation to target within a reasonable timeframe remains the Board’s priority,” he said.
“The recent data are consistent with inflation returning to the 2-3 per cent target range over the forecast horizon and with output and employment continuing to grow. Inflation is coming down, the labour market remains strong, and the economy is operating at a high level of capacity utilisation, although growth has slowed.”
Australia’s big four banks predicted the RBA would keep the cash rate on hold this month.
Both ANZ and Commonwealth Bank go on to predict that this extended pause from the RBA will continue well into 2024. At the same time, NAB expects the cash rate to be on hold until August 2024 before returning it to around 3% by early 2025. Westpac believes the cash rate will peak at the current rate of 4.10%.
However, Governor Lowe warns that “some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.”
“In making its decisions, the Board will continue to pay close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market,” Lowe stated.
“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
The September board meeting was also the last chaired by Philip Lowe, whose seven-year term as RBA Governor ends next week. Michele Bullock, the RBA's current Deputy Governor, will begin in the role on September 18.
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