Reserve Bank leaves interest rates on hold in an early Christmas present for borrowers – but here’s why Aussies with mortgages should be worried

Australian borrowers have been warned to expect another rate hike, even though the Reserve Bank left rates unchanged this month.

The cash interest rate is already at a twelve-year high of 4.35 percent, after the RBA last month raised rates for the thirteenth time in eighteen months.

But inflation of 4.9 percent in October was still well above the Reserve Bank's target of two to three percent.

That means there is no guarantee that the deepest monetary policy tightening since 1989 could get worse, with RBA Governor MIchele Bullock hinting at more pain on Tuesday.

“Whether further monetary policy tightening is necessary to ensure that inflation returns to target within a reasonable timeframe will depend on the data and the evolving risk assessment,” she said.

Economists fear the RBA could raise rates again in February if December quarter inflation figures, due in late January, show continued pressure on consumer prices.

The Reserve Bank last month adjusted its forecasts to bring inflation back to three percent by the end of 2025 instead of mid-2025, and this continues to worry the board.

“Returning inflation to target within a reasonable timeframe remains the administration's priority,” Ms Bullock said.

'High inflation makes life difficult for everyone and damages the functioning of the economy. It erodes the value of savings, hurts household budgets, makes it harder for businesses to plan and invest, and worsens income inequality.”