Why millions of Aussies are set to suffer even with rates on hold in June as Reserve Bank hints at more pain
Australian home borrowers face more pain even as the Reserve Bank left interest rates unchanged for the fifth time in a row – with a new inflation warning.
RBA cash remained on hold at a 12-year high of 4.35 per cent on Tuesday after a monthly inflation measure showed the Australian Consumer Price Index rose to 3.6 per cent in April from 3.5 per cent.
The CPI is still well above the RBA’s 2 to 3 percent range, with ANZ Bank predicting last week that the first rate cut would be delayed until February 2025, from November.
The Reserve Bank has also not ruled out a new interest rate increase, even though the European Central Bank cut interest rates this month.
“The administration remains steadfast in its determination to return inflation to target levels and will do what is necessary to achieve that outcome,” it said on Tuesday.
Australian home borrowers will face even more pain even as the Reserve Bank has put interest rates on hold for the fifth time in a row (pictured is an auction in Melbourne)
The Reserve Bank warned on Tuesday that Australian inflation is still too high, even as quarterly inflation readings have eased since hitting a 32-year high of 7.8 per cent in late 2022.
“According to the latest data, the pace of decline has slowed, with inflation still well above the midpoint of the target range of 2 to 3 percent,” the report said.
‘Inflation is declining, but slower than previously expected and remains high.
‘The board expects that it will take some time before inflation is sustainably within the target range.’
The RBA has refused to follow the European Central Bank’s lead in cutting interest rates this month, simply because Australian inflation is still too high.
A fall in unemployment to 4 percent in May, from 4.1 percent in April, is also a concern for the Reserve Bank.
The RBA has refused to follow the European Central Bank’s lead in cutting interest rates this month, simply because Australian inflation is still too high (pictured is Reserve Bank Governor Michele Bullock)
“Labor market conditions have eased further over the past month but remain tighter than consistent with continued full employment and inflation at target,” the report said.
The RBA has also not ruled out another increase, now that Australian cash rates are lower than those of the United States.
This means Australia’s four million home borrowers will most likely have to wait for relief from the most aggressive pace of monetary policy tightening since the late 1980s.