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RBA Rates Update Mar 23

07.03.23 | Marc Barlow | Reserve Bank Announcements

Rates up for tenth time in a row


The official cash rate has risen again with the RBA today lifting it to 3.60%.


Following today’s tenth increase on the spin, the under-fire RBA has now delivered these hikes faster than at any time on record.


Yet despite the pain this aggressive policy is causing for everyday Australians, the Central Bank is pinning its hopes on its rate rises controlling inflation sooner rather than later.


‘Global inflation remains very high. In headline terms it is moderating, although services price inflation remains elevated in many economies.


‘It will be some time before inflation is back to target rates,’ said the RBA today.


Those target rates are 2–3% so it’s true, it will take some time to get them down from the current 7.8%.


The Central Bank said last month the window for a ‘soft landing’ remains a narrow one. How narrow a window it purposely didn’t specify, but it’s clear they are covering themselves should that landing hit the economic tarmac with a thud.


It could get ugly when many fixed-rate mortgages end in the coming months. An estimated $275 billion worth of fixed-rate loans with the big four banks will finish between July and December this year. Add non-bank lenders, and it’s going to be a tough time for many.


This means, rates from banks and lenders could soar for a significant number of Australian households when their fixed-rate arrangements end and new, much higher, rates kick in. And as the cost of living remains high, this double whammy could have serious repercussions across the economy.


Amid the backdrop of an independent review into how the RBA operates monetary policy, there is increasing speculation that the RBA’s rate rises will lead to a recession. There is some justification for this view, given most Australian households are already scrambling to cut costs while mortgage stress is trending up.


As an example, some home loan borrowers are paying well over $1000 more a month compared to last April.


It’s hard to believe that the cash rate was just 0.1% in April last year.


So, perhaps it was no surprise to see protestors outside the RBA’s Martin Place offices recently, having their say on the social costs of this policy.


This is a fact the RBA acknowledged today, saying, ‘The Board recognises that monetary policy operates with a lag and that the full effect of the cumulative increase in interest rates is yet to be felt in mortgage payments.


‘Some households have substantial savings buffers, but others are experiencing a painful squeeze on their budgets due to higher interest rates and the increase in the cost of living.’


However, there is a sliver of good news with most market analysts believing rates are close to their ceiling as inflation peaks. A fact the RBA alluded to today.


‘The monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead,’ the RBA said.


The RBA next meets on 4 April. Could rates finally be put on hold, or will the cash rate be nudging 4%?


If you want to review your home loan arrangements, contact Mortgage Broker Group.


We can help with tips on how to uncover lower rates, boost your savings, consolidate other debts and take the pressure off increases in household prices.


Mortgage Broker Group operates nationwide, and our service is 100% free to you (lender fees and charges may apply).