RBA opts for back–to-back rate pauses
The RBA today has kept the official cash rate at 4.10% for a second consecutive month as inflation shows signs of easing.
Today’s rates reprieve for mortgage holders is an indicator that the RBA’s sustained policy of rate hikes is taking the sting out of rising inflation.
Consumer data backed this up with a spending drop in June as the cost of living continues to bite.
Meanwhile, the latest inflation figures saw the CPI grow by just 0.8% in the June quarter. On a 12-month basis, inflation is at 6.0%, down from 7.0% the previous quarter.
Though the RBA kept its options open today, noting that there may need to be further ‘tightening’ of monetary policy.
‘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,’ the Central Bank said.
‘The recent data are consistent with inflation returning to the 2–3 per cent target range over the forecast horizon,’ noted the RBA, adding that returning inflation to target within a reasonable timeframe ‘remains the Board’s priority’.
It will be interesting to see how new RBA Governor Michelle Bullock approaches the coming months when taking over from Dr Phillip Lowe next month.
The official cash rates at the US Federal Reserve, Bank of England and New Zealand’s Reserve bank are all higher than Australia (between 5.0-5.5%).
And as it has always said, Australia’s Central Bank is desperate for inflation not to be entrenched in the economy as it continues to work towards the target range.
With inflation slowly moderating, today is a boost for many mortgage holders struggling with the cost of living and higher variable or fixed-rate costs.
Underlining this point is home loan data showing that there aren’t any fixed rates mortgages from the big four banks that are under 6.0%. Additionally, data from Roy Morgan research revealed that the number of Australians facing potential mortgage stress is at its highest level since the GFC.
That said, if there is a jump in unemployment – as some analysts are predicting due to slowing business growth – the number of households considered “at risk” could quickly spike.
But the national housing market remains solid with modest growth in most of the major cities.
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