Interest Rate Hike
Too many predictions have proven wrong today as The Reserve Bank of Australia handed down a cash rate hike to bring down the high inflation rate.
The central bank increased the interest rate by 25 basis points from the previous 3.6 per cent to 3.85 per cent.
From a record-low level of 0.1 per cent interest rate, it is been the 11th interest rate lift since April 2022.
HISTORY OF INTEREST RATES
In his latest statement, RBA Governor Philip Lowe declared that Australia’s cost of living remains excessively high. He explained that “while inflation has peaked, the current 7% rate will take time to fall within the target range. To expedite this process, the Board determined a further interest rate increase was necessary today.”
Mr Lowe added, “It will take a couple of years for inflation to align with the RBA’s 2-3% target range.”
“Last month, the Board kept interest rates steady to better assess economic conditions and forecasts,” Lowe said. However, “Even with recent data revealing a decline in inflation, the central prediction is that inflation will only reach the upper target range in a couple of years, with 4.5 per cent expected in 2023 and 3 per cent by mid-2025.”
“While the cost of imported goods was falling as supply chain disruptions eased, the cost of domestic services was increasing at a faster pace in a worrying sign that inflation may be persistent, which leaves the possibility of further rate rises to come”, Mr Lowe said.
The head of consumer research at Finder, Graham Cooke said, the latest news is a huge blow for many Australians. “Aussies with an average loan size of $586k will be paying out around $14,000 more annually than what they were paying same time last year.”
Jim Chalmers, The treasurer, said the forthcoming budget will prioritise “responsible cost-of-living relief” which does not add to inflation. “This is a really difficult decision for a lot of Australians who are already under the pump”, he added.
The 0.25 per cent hike today will increase $79 to the average monthly repayment on a $500,000 loan.
Since the RBA began raising rates in May last year, customers with a half-a-million-dollar debt will experience a monthly repayment surge of approximately $1,058.