RBA keeps cash rate steady at August meeting
For the first time in 16 months the Reserve Bank Board has stayed its hand at two consecutive meetings, with the decision at this afternoon's August monetary policy decision meeting meaning that the official cash rate will remain unchanged at 4.10% for at least another month.
Last weeks' lower-than-expected Consumer Price Index of 6.0% for the 12 months to the June quarter had raised expectations of another rate pause, and that proved to be the case with governor Philip Lowe suggesting that previous rate rises were having an impact on inflation.
"Interest rates have been increased by four 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."
As has been the pattern after recent meetings, Lowe did leave the door open for another possible rate rise in the near future though.
"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 the data and the evolving assessment of risks."
The consensus among some experts certainly seems to be that the RBA Board isn't quite through with hiking rates just yet.
Finder's latest survey of economists and experts taken in the lead up to today's meeting found that just 11 of the 38 respondents believed that the cash rate's peak would be 4.10%.
Meanwhile, 15 believed that the peak would fall somewhere between 4.10% and 4.35%, while a further 12 expected an even higher terminal rate.
Mark Melatos, an associate professor of economics at the University of Sydney who was one of the survey respondents that correctly predicted today's rate pause, indicated that inflation still posed an issue going forward.
"Inflation appears to be moderating more quickly than expected. However, it still remains significantly above the Reserve Bank's target range. There is still upside risk to rates especially if inflation stagnates above the 2-3% target."
More households struggle with mortgage repayments
While another pause will likely be welcomed by Australians paying off a mortgage, it doesn't change the fact that previous interest rate rises appear to be straining the budgets of a growing number of households.
Over 1.43 million people were estimated to be at risk of mortgage stress in the three months to June according to the latest Roy Morgan research - 530,000 more than there were a year before. In fact, the June estimate is the highest figure recorded since 2011.
"The latest figures show rising interest rates are causing a large increase in the number of mortgage holders considered 'At Risk' and further increases will spike these numbers even further," says Roy Morgan chief executive, Michele Levine.
"If there is a sharp rise in unemployment, mortgage stress is set to increase towards the record high of 35.6% of mortgage holders considered 'At Risk' in May 2008 during the Global Financial Crisis."
In separate research, Finder found that 40% of homeowners were struggling to afford their mortgage repayments in July.
The latest number is a notable jump on the 26% of respondents who were struggling in July 2022. Unfortunately, Finder's home loan expert Richard Whitten says the situation is likely to get worse before it gets better.
"Our panel is largely in agreement that the combination of cash rate hikes and the expiry of more fixed rate loans will see mortgage distress reach a peak over the coming months."
New agenda from 2024
Nothing may have changed on the cash rate front since the Reserve Bank's last meeting in early July, but plenty else has changed.
Last week the central bank revealed the 2024 meeting dates for the Reserve Bank Board, confirming that it would meet eight times a year (roughly every six weeks) rather than the current 11, following a recommendation put forward in the recent RBA review.
The first meeting of the year will be held over two days on February 5 and February 6, followed by a 2:30pm announcement on the second day and a 3:30pm media conference fronted by the governor.
Speaking of which, after months of speculation the federal government also announced that the current deputy governor, Michele Bullock, would be taking over as governor from incumbent Philip Lowe from September 18 this year.
The leadership change means that - now that today's meeting is done and dusted - Lowe will preside over one final monetary policy meeting when the RBA Board meets next on September 5.
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