RBA Leaves Rates On Hold
The central bank remains focused on inflation.
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The Reserve Bank of Australia has unsurprisingly left interest rates on hold, despite the Australian property market’s record start to 2021.
The measures are in place to support the economy needs as it transitions from the recovery phase of the COVID pandemic, to the expansion phase – despite the current lockdown measures in place in various parts of the country.
In his monthly statement, the RBA governor, Dr Philip Lowe, indicated the economic recovery in Australia is stronger than expected and is now forecast to continue on this trajectory.
“The outlook for investment has improved and household and business balance sheets are generally in good shape,” said Dr Lowe.
On housing markets, the statement commented on the prices rising in all major markets reiterating past statement sentiments.
“Given the environment of rising housing prices and low-interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”
“The Board remains committed to maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range.”
Elsewhere, the labour market has strengthened – unemployment now down to 5.1% in May alongside a decline in underemployment and labour force participation at around record highs.
However, the RBA is still cautious, Dr Lowe stating: Despite the strong recovery in jobs and reports of labour shortages, inflation and wage outcomes remain subdued. While a pick-up in inflation and wages growth is expected, it is likely to be only gradual and modest
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Mortgage holders are bracing themselves for more pain ahead of this afternoon’s board meeting of the Reserve Bank of Australia.
Westpac, ANZ and NAB are all predicting a rise of 25 basis points to the cash rate. The Commonwealth Bank has also said a rate rise is the most likely outcome, but that there is a small chance that the RBA may decide to leave the cash rate unchanged.
Another rate rise today would make it the eighth consecutive rise since April, when it was at a record low of 0.1 percent. At present, the cash rate is at 2.85 percent.
According to RateCity, a further 0.25 percent increase would add another $75 a month to repayments based on a $500,000 loan.
Inflation has remained stubbornly high at 7.3 percent and rising rates reflect an attempt to drive it down to a more palatable 3 percent into 2023.
Today is the last RBA board meeting for 2022, with the next meeting scheduled for February 2023.
The Victorian capital’s top-grossing transactions.
