Reserve Bank boss signals rate hikes may end after raising mortgage payments for tenth time: ‘Closer to the point’
- The Reserve Bank chief proposes that interest rates be raised soon
- Governor Philip Lowe suggested pausing moves
The Reserve Bank boss has suggested he could “pause” rate hikes soon.
Governor Philip Lowe told a breakfast on Wednesday morning that this month’s 10th consecutive increase could be one of the last, a day after rates were raised to an 11-year high of 3.6 percent.
“We also discussed that with monetary policy now in a restrictive area, we are closer to the point where it is appropriate to pause interest rate hikes to have more time to assess the state of the economy,” he said. the Financial Review Business Summit. 2023 in Sydney.
“We estimate that the more recent rate hikes have pushed monetary policy into restrictive territory, which was necessary to ensure that the current period of high inflation is only temporary.”
The RBA cash rate was raised to an 11-year high of 3.6 percent on Tuesday, with the latest increase of 0.25 percentage points, the 10th consecutive increase since May 2022.
Three of Australia’s Big Four banks – Westpac, ANZ and NAB – expect the RBA to raise rates again in April and May, which would push the cash rate to 4.1 percent.
The Commonwealth Bank is forecasting another hike in April, taking it to 3.85 percent.
The Reserve Bank boss has suggested it could soon stop raising interest rates. Governor Philip Lowe told a breakfast on Wednesday morning that this month’s 10th consecutive increase could be one of the last (Governor Philip Lowe is pictured at Bonnie Doon Golf Club in Pagewood in southeastern Sydney)
In the accompanying statement, Dr Lowe downplayed the risk of a wage-price spiral, even though wages rose 3.3 percent last year – the fastest pace in a decade.
“At the aggregate level, wage growth is still in line with the inflation target and recent data point to a lower risk of a price-wage chasing cycle,” he said.
Dr. Lowe’s language differs from February’s statement, in which he warned that more rate hikes were needed with the 32-year high inflation rate of 7.8 percent, well above the RBA’s target of 2 to 3 percent.
A borrower with an average $600,000 mortgage will see their monthly payments rise another $93 to $3,377, a 46 percent increase from the $2,306 level of early May 2022, when RBA rates were still at a record low of 0.1 percent
“The board expects that further rate hikes will be necessary in the coming months to ensure that inflation returns to target and that this period of high inflation is only temporary,” he said in February.
A borrower with an average $600,000 mortgage will see their monthly payments increase by another $93 to $3,377, a 46 percent increase from the $2,306 level of early May 2022, when RBA rates were still at a record low of 0.1 percent.
Annual repayments are now $12,852 more expensive than just 10 months ago, with cash interest now at its highest level since early June 2012 after last quarter’s percentage increase.