At its board meeting today, the Reserve Bank of Australia (RBA) has decided to leave the cash rate unchanged for the fourth month in a row at 4.10% – 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 new RBA Governor Michele Bullock in a media release 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.”
For homeowners and property buyers, the rise in interest rates has meant increased interest on mortgages. 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.
“High inflation is weighing on people’s real incomes and household consumption growth is weak, as is dwelling investment,” said Governor Bullock.
“The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers, and higher interest income.”
Returning inflation to target within a reasonable timeframe remains the Board’s priority. They recognise the strain inflation places on people’s lives and resolve to return CPI inflation within the 2-3% target range in late 2025.
“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.”
Since May 2022, the RBA has increased interest rates by four percentage points. This month’s decision marks the fifth time the Board has paused its rate-hiking within this period.
However, the Board 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,” explained Governor Bullock.
“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”
For more news, market insights, and lifestyle, click here.
Header image source.