RBA reveals decision on June cash rates

At its monthly board meeting on Tuesday, June 7, the central bank, led by Governor Philip Lowe, moved aggressively to raise the spot rate from its current rate of 0.35% to 0.85. %.

This is an increase of 0.50% from the target introduced only last month and continues to set the tone for a higher rate environment amid record inflation and weak wage growth. during the first quarter of 2022.

RateCity’s research director, Sally Tindall, had previously considered today’s rise to be “a virtual certainty”.

She acknowledged that central banks around the world are struggling to get inflation under control, “and the Reserve Bank of Australia doesn’t want to be one of them.”

Adding that the board “would like to nip this in the bud,” she shared that the RBA “will likely take a rapid approach to rate hikes over the next six to 12 months.”

Taking a closer look at its impact on the housing market, PropTrack economist Paul Ryan noted that higher interest rate expectations have already weighed on house price growth across the country.

“Housing price growth has slowed significantly, with annual price growth falling from 24% six months ago to just 14% in May,” he said, with the slowdown having particularly affected financial markets. more expensive from Sydney, Melbourne and the ACT.

He expects that even with such a severe impact on real estate, further interest rate hikes will occur during 2022, “but the level of interest rates at the end of the year is a key source of uncertainty for the housing market”.

Mr Ryan argued that if financial markets have priced in a 2 percentage point higher cash rate at the end of the year, which would increase mortgage repayments by another 24%, this differs from the opinion of leading forecasters. Australian banks, which “I don’t think it’s likely the RBA will hike rates that quickly, predicting a rate hike closer to half”.

Finance Brokers Association of Australia (FBAA) chief executive Peter White AM also acknowledged the likelihood that more cash rate hikes are on the near horizon, despite uncertainty over the height of the objective.

“We hope, for the sake of borrowers, that we will see smaller increases over the next few months rather than larger increases, as this will allow people to prepare and budget,” he shared.

According to Mr White, with rates likely to go higher than expected for much of the past two years, this presents “a great danger to many Australian households”.

“While understanding the need to slow the economy by raising rates, we must also recognize that if rates rise more than expected, the social impact could be devastating,” he said.

According to the general manager, “last month’s increase added about $100 to many people’s monthly repayments.”

He expects today’s increase to add another $100 to $150.

“If this continues month after month, many people will find themselves unable to meet their repayments,” he said.

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About the Author

Grace Ormsby

Grace is a reporter for real estate and investment brands Momentum. Grace joined Momentum Media in 2018, bringing with her a Bachelor of Laws and a Bachelor of Communications (Journalism) from Newcastle University. She is passionate about providing easy-to-digest information and relevant content for her key audiences and… Read more

RBA reveals decision on June cash rates




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Last update: June 07, 2022

Posted: Jun 07, 2022