The RBA has again raised the official cash rate, delivering a fourth increase this year by elevating it to 4.10% today.
Once again, the RBA has emphasised the significant impact of inflation as a key factor guiding its monetary policy decisions.
The most recent inflation figures released last week clearly played into today’s decision. On an annual basis, the headline inflation rate rose to 6.8%, up from 6.3%, even though the underlying inflation rate dropped from 6.9% to 6.5%.
For Sydneysiders, the temporary pause in the cash rate back in April now must feel like a distant memory as they brace for yet another hike in their variable home loan repayments.
‘Inflation in Australia has passed its peak, but at 7 per cent is still too high,’ said the RBA today, adding that ‘it will be some time yet’ before it is back in the target range.
‘This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.’
As always, the RBA kept options open for a further rate increase, noting that ‘further tightening of monetary policy may be required to ensure inflation returns to target’.
Today’s news comes just a month after the Treasurer unveiled the federal budget on 9 May. While Jim Chalmers received praise for the measures aimed at alleviating the cost of living crisis, some analysts expressed concerns over the potential impact on inflation of the increased spending in the budget.
With this in mind, there are concerns that the fiscal stimulus in the budget might affect inflation. And this in turn may lead to more rises in the cash rate this year, or at least keeping it higher for a longer period of time.
It is particularly concerning for Sydneysiders approaching the “Mortgage Cliff,” which refers to a critical point where borrowers reach the end of their fixed-rate mortgage terms and transition into a variable rate or a higher fixed rate.
‘High inflation makes life difficult for people and damages the functioning of the economy,’ warned the RBA.
‘It erodes the value of savings, hurts family budgets, makes it harder for businesses to plan and invest, and worsens income inequality.
‘And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment.’
Last month, we forecast that we could be around 4.0% by the time winter is upon us. And sure enough, as we said goodbye to autumn, the cash rate is up again.
If rates have you concerned, contact Mortgage Broker Sydney. Our friendly brokers can meet you wherever is most convenient: your home, office or local cafe. We’re flexible.
We can also help with tips on how to uncover lower rates, boost your savings, consolidate other debts and take the pressure off increases in household prices.
Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!