The Reserve Bank of Australia (RBA) provided much-needed insurance to Australian customers against potential mortgage troubles just before Christmas.
In response to signs that inflation was starting to decrease, the Australian central bank agreed to cease hiking interest rates during its last meeting of 2023 on Tuesday afternoon.
The Reserve Bank of Australia (RBA) stunned Australian households in October of last year by hiking the cash rate to 4.35 percent, which was the first increase in four months. This is the reason behind the current action.
With the probable date of the RBA board meeting being in February, mortgagees have some lead time to get ready.
The cash rate of 4.35 percent is still in force.
Considering the record low of 0.1% that Australians experienced during the COVID-19 pandemic, it is still a remarkable improvement.
Over the next two years, there was a 425 basis point increase in the rate.
The rate is currently at its highest level since 2011.
Because “inflation is continuing to moderate,” the board made this choice under the direction of RBA governor Michele Bullock.
Though Ms. Bullock conceded that the inflation and cost of living crises were “weighing on people’s real incomes,” she cautioned that the Reserve Bank of Australia will do “what is necessary” to reduce inflation to its two to three percent objective.
She went on to say that all inflation measurements’ behavior “remain(s) consistent with the inflation target.”
Australia’s Official Cash Rate
Australians are beginning to feel the pinch after two years of rising interest rates.
Finder, a comparison website, reports that monthly mortgage payments for those with a $600,000 loan are approximately $1,349 higher than they were before the RBA began raising the cash rate in May 2018.
Over two million Australian homes are overpaying on monthly expenses, according to new data from Digital Financial Analytics, which was reported in a news.com.au piece last month.
In the middle of the crisis brought on by escalating living expenses, up to 35% of households have already withdrawn money from their offset or redraw account to pay bills, according to a recent Canstar poll.
MyState Bank data released last month indicated that 43% of mortgage holders had spent the preceding six months searching for a better offer on a house loan.
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According to one economist, when the RBA meets in February of next year, Australians should brace themselves for another rate hike.
AMP’s deputy chief economist, Diana Mousina, predicts that interest rates will start to decline in the middle of the next year. She has also cautioned that there will likely be a rate increase in February.
“We acknowledge the high risk (~45% chance) of another 0.25% rate hike, which could come at the February Board meeting, but our base case is for the cash rate to remain unchanged at 4.35% until the start of rate cuts in mid-2024,” she stated.
A Reuters survey indicates that a decline in the rate is anticipated in the fourth quarter of 2024.
According to the consumer price index (CPI), inflation has considerably decreased from a year ago.
The inflation rate is 4.9%, which is less than most economists had anticipated.
The inflation rate has dropped from its peak of 8.4% in December of last year, following multiple straight increases.
Some general FAQs about the Reserve Bank of Australia (RBA)
It aims to raise the stability of the financial system and enhance the security and efficiency of the payment system. It also offers banking services to the government. The Commonwealth of Australia is the only shareholder in the bank as a corporate entity. Go to the RBA website to find out more.
Ensuring the stability, efficiency, and competitiveness of the payment system is the responsibility of the Reserve Bank. Apart from its operational and regulatory roles, the payment infrastructure contributes to the maintenance of financial stability. The Reserve Bank is responsible for producing and printing Australia’s currency.
The Reserve Bank of Australia (RBA) now sets the official cash rate, which is 4.35%. December 5, 2023, is the projected date of the RBA Board meeting and the next official announcement of the cash rate.
Michele Bullock is the governor of the Reserve Bank of Australia. Officially, Governor Bullock took office on September 18, 2023. She is the chair of the Reserve Bank Board, the Payments System Board, and the Council of Financial Regulators.
Australia is believed to have the greatest gold deposits in the world, holding 9,500 metric tons of gold reserves, or 17% of the estimated 57,000 metric tons of gold reserves globally. 60% of Australia’s gold deposits are thought to be in Western Australia, according to estimates from Geoscience Australia.
The Reserve Bank of Australia and the Commonwealth Bank of Australia were founded in 1911. The Commonwealth Bank, formerly owned by the government, was a savings and trade bank. Over the next decades, it progressively started to take on an increasing number of the responsibilities related to becoming a central bank.
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