Reserve Bank Leaves Interest Rates Untouched in Major Victory for Millions of Homeowners in One of Philip Lowe’s Last Acts as Governor
The Reserve Bank has left interest rates unchanged for the third month in a row at the highest level in eleven years, namely 4.1 percent.
Philip Lowe, who presided over his last meeting as RBA governor, left cash rates unchanged on Tuesday, bringing relief to millions of home borrowers facing a cost-of-living crisis.
“Inflation in Australia has peaked,” he said.
Dr. Lowe, whose seven-year term expires on Sept. 17, had led the most aggressive pace of monetary policy tightening since 1989, with 12 rate hikes since May 2022.
In his latest monthly statement, he defended his legacy after suggesting in 2021 that interest rates would not rise until 2024 “at the earliest.”
“The higher interest rates are and will continue to provide a more sustainable balance between supply and demand in the economy,” he said Tuesday.
The Reserve Bank has left interest rates unchanged for the third month in a row at the highest level in eleven years, namely 4.1 percent. Philip Lowe (left with deputy Michele Bullock) presided over his last meeting as RBA governor
“In light of this and the uncertainty surrounding the economic outlook, the board decided again this month to keep interest rates stable.”
Australian home borrowers have seen their monthly repayments rise by 63 percent in just over a year.
As late as May 2022, a borrower with an average mortgage of $600,000 had debts of $2,306 per month, while the variable rate had another “two” ahead.
This same borrower would now have to pay $3,769 a month at a floating rate of 6.44 percent.
Since peaking at 8.4 percent late last year, the monthly measure of annual inflation has moderated, from 5.4 percent in June to 4.9 percent in July, the lowest level since February 2022.
While inflation is still well above the Reserve Bank’s target of two to three percent, the Australian Securities Exchange’s 30-day interbank futures market expects the next step to be a rate cut in late 2024.
An interest rate break on Tuesday was considered an 86 percent chance, compared to a 14 percent chance of a rate cut.
Since peaking at 8.4 percent late last year, the monthly measure of annual inflation has moderated, falling to 4.9 percent in July, the lowest level since February 2022, from 5.4 percent in June (pictured shows a shopper from Woolworths in Sydney’s east). )
There was no interest rate hike for September.
But the RBA still expects consumer price index inflation to remain high through the end of 2025.
Inflation is still too high and will be for some time to come.
“While commodity price inflation has declined, the prices of many services are rising rapidly.
Rental inflation is also high.
“The central forecast is that CPI inflation will continue to fall and will be back within the target range of 2 to 3 percent by the end of 2025.”