The Reserve Bank of Australia (RBA) has decided to leave the interest rate unchanged at its board meeting today, leaving the cash rate at 3.60%.
This decision was made after a continued increase in interest rates since May 2022 which brought the cash rate to an 11-year high.
In his statement following the announcement, RBA Governor Philip Lowe stated, “The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt.
“The Board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.”
This gives mortgage borrowers a reprieve, though the Board expects “some further tightening of monetary policy may well be needed to ensure that inflation returns to target.”
As a result of these continued rate increases, the average borrower with a 25-year, $500,000 loan at the start of the hikes in May 2022 could soon be paying almost $1,000 more monthly on their mortgage.
Dr Lowe recognises the effects of these interest rate hikes on the housing market, saying in his statement, "Rents are increasing at the fastest rate in some years, with vacancy rates low in many parts of the country.”
“There is further evidence that the combination of higher interest rates, cost-of-living pressures and a decline in housing prices is leading to a substantial slowing in household spending. While some households have substantial savings buffers, others are experiencing a painful squeeze on their finances.”
He stated that the Board seeks to return inflation to the targeted 2-3% range.
“In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market,” said Dr Lowe.
“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
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