Reprieve for mortgage holders as RBA leaves interest rates on hold
Mortgage holders have been given a welcome reprieve following the Reserve Bank’s decision to hold interest rates steady for the second time this year but further tightening could come next month.
At its monthly meeting on Tuesday, the RBA board left the official cash rate unchanged at 4.10%.
In a statement, RBA governor Philip Lowe said inflation in Australia had passed its peak and the monthly CPI indicator for May showed a further decline.
But he added, inflation is still too high and that it will remain so for some time yet.
“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.
“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,” he said.
PropTrack Senior Economist Paul Ryan said the RBA judged that recent data on the labour market and inflation was in line with its expectations, and opted to wait for additional data on inflationary pressures and productivity growth, in particular.
“Nevertheless, the RBA signalled that more tightening may be needed to rein in inflation, with many expecting another hike – the 13th since May 2022 – to come as early as next month,” he said.
“More tightening is expected to be needed to bring inflation back to the RBA’s target, but rates are close to their peak, which is good news for the housing market.”
The housing market has so far shown remarkable resilience to sharply higher interest rates, Mr Ryan said.
The PropTrack Home Price Index revealed Australian home prices jumped again in June, rising 0.3% month-on-month.
National prices were now just 0.1% lower than they were a year ago, and across the capitals, prices were now higher than at the same time last year.