labelCategory: RBA Cash Rate
The Reserve Bank of Australia has left the cash rate unchanged at 4.1%.
Why Did The RBA Leave The Cash Rate Unchanged?
In his statement on the RBA’s decision, Governor Dr Philip Lowe said, “Interest rates have been increased by 4 percentage points since May last year. The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so. In light of this and the uncertainty surrounding the economic outlook, the board decided to hold interest rates steady this month. This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook.”
Lowe continued, “Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve. The decision to hold interest rates steady this month provides the board with more time to assess the state of the economy and the economic outlook and associated risks. In making its decisions, the board will continue to pay close attention to developments in the global economy, trends in household spending, and forecasts for inflation and the labour market. The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.”
What Do Our Experts Say About The RBA’s Decision?
Home Loan Experts CEO Alan Hemmings said, “For only the second time in 15 months, the Reserve Bank left the cash rate unchanged, at 4.1%. The decision follows inflation dropping from 6.8% to 5.6% in May – a stronger-than-expected improvement. The decision by the Reserve Bank is an indication we may be nearing the end of the increasing cycle. The RBA will, however, keep a close eye on inflation and will want to see it continue to decrease. If the momentum from May slows, the Reserve Bank may be forced to increase rates again.”
Hemmings further noted that, “Commentary from lender economists indicates that they are still predicting further cash rate increases. The question is how many, with some predicting one more and others two more.”
What Does This Mean For You?
Hemmings added that all the recent increases in interest rates would continue to affect borrowing capacity. He explained:
- If you are looking to purchase, make sure you understand how much you can borrow before going to auction or making an offer, particularly as very few new properties are coming onto the market, driving increased competition and pushing up prices.
- If you already have a mortgage, staying on top of your current interest rate is important, as is knowing what offers are available in the market and making sure you have the best deal.
- If you are struggling with the increase in repayments, make sure you talk to your lender. As always, using a broker to work out the best outcome is recommended.
How Does The Cash Rate Affect My Interest Rate?
Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers. So if you have a variable interest rate, it will almost certainly go up with a cash rate increase.
You can use our repayment calculator to find out what your repayments should look like.