RBA delivers its first rate pause in 2026
Australia’s Reserve Bank left the official cash rate unchanged at 4.35% following today’s board meeting, delivering a pause after three rate hikes so far this year.
‘The latest data show that headline and underlying inflation are still too high,’ noted the RBA today.
It added that it will do what it considers necessary to achieve price stability and full employment, ‘including increasing the cash rate target further if required.’
So, rate hikes are still very much an option this year. Particularly as the RBA feels inflation could remain high for a while longer.
‘As expected, the disruption to global oil supply is having an impact on inflation.
‘Higher fuel prices have added directly to inflation and there are indications that this is passing through to the prices of other goods and services, so inflation is likely to remain high for some time,’ noted the Central Bank.
Encouragingly, headline inflation slowed to 4.2% in the 12 months to April, down from 4.6% previously.
However, underlying inflation, which the RBA views as a more reliable measure of persistent price pressures, edged up from 3.3% to 3.4%.
Both measures remain above the RBA’s preferred 2%–3% target band, which doesn’t bode well in terms of further rate hikes.
Back in January, the cash rate sat at 3.60%, with some economists forecasting it would fall to around 3.10% by the end of the year.
Those expectations shifted as conflict in the Middle East added to inflationary pressures through higher oil prices and supply chain disruptions.
For a homeowner with a $600,000 mortgage, this year’s three increases have added around $270 more a month in borrowing costs. Cancelling Netflix doesn’t even touch the sides.
Lenders have already begun adjusting their pricing.
NAB was the first major bank to raise fixed home loan rates following the May cash rate increase.
Current variable mortgage rates of 5.7% to 6.4%, and fixed rates of 5.8% to 6.6%, reflect market expectations of one further RBA rate increase, says AMP Head of Investment Strategy and Chief Economist Shane Oliver.
At the same time, competition for new borrowers remains strong, with 11 lenders cutting at least one variable home loan rate for new customers.
The current ceasefire in the Middle East is also feeding into that more cautiously optimistic outlook.
If you would like to review your home loan arrangements, contact Mortgage Broker Group.
We can assist with tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household prices.
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