Commonwealth Bank warns of 40 basis point RBA rate hike on February 7
>
Interest Rate Impact as Commonwealth Bank Warns Mortgage Holders to Expect BIG Rise Next Week
- Commonwealth Bank fears 40 basis point rate hike
- The largest lender said 25 percent probability on February 7
The Commonwealth Bank is warning home borrowers to prepare for a possible large interest rate hike next week.
Australia’s largest mortgage lender fears the Reserve Bank will raise the cash rate by 0.4 percentage point on February 7 with inflation at 7.8 percent, the highest in 32 years.
This would take the RBA cash rate to a new 10-year high of 3.5 percent, up from 3.1 percent today.
Gareth Aird, head of Australian economics at the Commonwealth Bank, said this potential 40 basis point rise would be the last in the Reserve Bank’s tightening cycle.
“We believe there is a non-trivial risk that the RBA will raise the cash rate by a larger 40 basis points to 3.5 percent and also announce its intention to keep the policy rate stable over the next period if economic developments they evolve broadly in line with their updated forecasts,’ he said.
The Commonwealth Bank is warning home borrowers to prepare for a possible large interest rate hike next week (a bank branch is pictured)
“We believe that if the RBA delivered a whopping 40 basis point hike in February, it would be coupled with a stated expectation from the board to keep the cash rate on hold for the next period while it assesses the impact of cumulative rate increases.” .
Aird described the probability of a 0.4 percentage point increase as a 25 percent probability.
The Reserve Bank raised the cash rate by 0.5 percentage point in June, July, August, and September before raising it again by 0.25 percentage point in October, November, and December.
The eight hikes last year brought the cash rate to 3.1 percent, and the 300 basis point rise for eight consecutive months marked the most severe pace of monetary policy tightening since the RBA published a target cash rate. in 1990.