Rates on Hold?

Homeowners breathed a sigh of relief this week as the Reserve Bank of Australia (RBA) opted not to raise interest rates unlike at its previous 10 months.

However, we may have to endure a bit more pain until things get easier.

The RBA has indicated that further rates rises may be on the way.  The Bank’s Governor said in a recent speech “the board expects that some further tightening of monetary policy may well be needed to return inflation to target within a reasonable timeframe.”

And the bosses of the Big Four banks have all said that further rate rises are on the way too.

The 10 consecutive increases have seen repayments on a 25-year, $500,000 loan rise $983 per month – is being taken as a sign the RBA is nearing the finish line on rates, or is already there.

But its increasingly clear that, if we have not reached the peak in interest rates, we are close to the top.

And, with inflation starting to dip, there is now talk of rate cuts being on the way.  The Australian Financial Review’s survey of 36 economists puts the first post-pandemic rate cut in play by February 2024, according to the median forecaster. A quarter of respondents predict it could even happen this year.

None of us have enjoyed these rate rises.  But the economy has coped well so-far and the worst may-well soon be over.

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