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RBA Indicates Possible End to Interest Rate Hikes by September

RBA Indicates Possible End to Interest Rate Hikes by September

The Reserve Bank of Australia (RBA) has raised interest rates for the tenth consecutive time, culminating in an increase of $1,080 per month for payments on a $600,000 variable mortgage.
However, the good news for borrowers is that an end to the rate hikes is in sight, with the possibility of a tapering off as early as mid-September.

While the RBA has indicated that further tightening may be required, the lack of a plural reference in the statement could mean only one more increase, not necessarily next month. The bank has been trying to curb Australia's sudden reemergence of high inflation and ensure that it is only temporary. Although inflation hit 7.8% in December, the good news is that it seems to be easing to the extent that it comes from overseas prices for fuel and other imports.

On the domestic front, a surge in spending has stopped, with retail spending remaining flat for the past four months, despite a growing population and prices. As a result, consumer confidence has dived to its lowest point since the 2020 COVID recession, and GDP growth has slowed.

Wage figures show a growth of just 3.3% in the year to December, below the increase in prices and Governor Philip Lowe's target growth of 5%.

The RBA board remains vigilant about the risk of a prices-wages spiral, which could indicate further increases.

However, Governor Lowe's five-year term expires on September 17, and he wants to leave the bank in good order by breaking the back of runaway inflation. This could mean going harder for longer on interest rate rises than he otherwise would. Lowe has six months left to get his house in order.

Published:Thursday, 9th Mar 2023
Source: financialservicesonline.com.au

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