RBA interest rate pause hint in Philip Lowe’s statement gives hope to homebuyers

Inserting a single word into the Reserve Bank’s statement at the most recent rate hike could spell respite for struggling mortgage holders.

Announcing the 10th straight month of increases on Tuesday, pushing cash interest rates to an 11-year high of 3.6 percent, Governor Philip Lowe gave a subtle hint that the central bank might finally try to put the foot down. of the economic brake.

When deciphering the RBA’s typically cautious language, a single change from the previous month can make a huge difference, and a number of commentators grabbed the word “when” in Dr. Lowe’s last statement.

In Tuesday’s statement, Dr. Lowe said the RBA would look at various data to “assess when and how much more interest rates should rise,” having previously only discussed “how much” rates would rise.

A single sentence in Dr. Lowe’s statement indicates that rate hikes may no longer be automatic from now on

Bill Evans, Westpac’s chief economist, noted that while the RBA was still predicting rate hikes would be necessary, the timing of those hikes was suddenly in question.

“There is some clear evidence in the governor’s statement that a pause can be expected in April, but the big picture for inflation has not improved enough to warrant that call,” Evans said.

“We continue to expect rate hikes in both April and May.”

AMP chief economist Shane Oliver also thought Dr Lowe’s statement could indicate a pause in the rises.

“It (Dr Lowe’s statement) is still aggressive but has opened the door for a break that we expect next month,” he said.

“We think the RBA has done enough and should now pause and that is our base case for next month.

“Keep raising interest rates from now on risks plunging the economy into recession.”

Tuesday’s rate hike was the 10th in a row, putting enormous pressure on home lenders (stock image)

In his statement, Dr. Lowe maintained that taming inflation was still the RBA’s top priority, but noted that some price increases had finally started to ease.

“The monthly CPI indicator suggests that inflation in Australia has peaked,” said Dr Lowe.

After the interest rate announcement, Dr. Lowe on Tuesday at the Australian Financial Review’s Business Summit in Sydney said the board had discussed the timing of holding interest rates.

“At our board meeting yesterday, we discussed the slowdowns in monetary policy, the effects of the large cumulative rise in interest rates since May and the difficulties higher interest rates are causing for many households,” he said.

“We also discussed that with monetary policy now in a restrictive area, we are closer to the point where it is appropriate to pause interest rate hikes to have more time to assess the state of the economy.”

Dr. Lowe said the economic environment was very complex with measures pointing to conflicting issues.

“Inflation has been high for three decades,” he said.

The unemployment rate is near its lowest point in five decades. Australia’s terms of trade are close to an all-time high.”

Given these uncertainties, the Board is closely monitoring data on a month-to-month basis toflexibility to react when needed’.

Canstar chief economist Steve Mickenbecker, chief economist at the price comparison site, told Daily Mail Australia mortgage holders can expect pain for a few more months.

“I think we’ll see one more, probably two more increases before we see a break,” said Mr Mickenbecker.

Mr Mickenbecker said that while the RBA was well aware that it would not have to keep raising rates until inflation was brought back into its target range (two to three per cent), it should still be ‘well on track’.

“It’s not going well at the moment,” he said.

“He (Dr. Lowe) stressed that it’s about the data.”

Treasurer Jim Chalmers (pictured in federal parliament) said the latest rate hike would make borrowers’ lives tough

A key indicator the RBA will look at is wage growth data, with official numbers expected shortly before the April interest rate decision.

If wage growth is relatively low, the RBA may hold back rising rates because the economy is already slowing.

Dr. Lowe has previously expressed concern that high wage growth could drive up inflation, but in Tuesday’s statement he expressed reassurance that this was not happening.

“At the aggregate level, wage growth is still in line with the inflation target and recent data point to a lower risk of a price-wage chasing cycle,” he said.

Treasurer Jim Chalmers told ABC radio on Wednesday there were encouraging signs that inflation had peaked.

“Inflation will moderate over the course of the next 12 to 18 months, we would like to see it decline faster and as quickly as possible,” he said.

“Of course I’m concerned about the position Australians are in, especially Australians with a mortgage.”

Tuesday’s interest rate hike means a borrower with an average $600,000 mortgage will see their monthly repayments increase by another $93 to $3,377, a 46 percent increase from the $2,306 level of early May 2022.

Annual repayments are now $12,852 more expensive than just 10 months ago.