Tens of millions of Australian dwelling homeowners have been spared one other enhance of their mortgage payments on Tuesday when the Reserve Financial institution hit pause on a record-breaking string of rate of interest hikes that lasted virtually a complete yr.
The transfer – which brings an finish to 10 consecutive will increase which have seen repayments on a 25-year, $500,000 mortgage rise to $983 per 30 days – is being taken as an indication the RBA is nearing the end line on charges, or is already there.
However these hoping the times of heaping ache onto household budgets in a bid to curb inflation at the moment are over may nonetheless be left dissatisfied.
RBA boss Philip Lowe has already urged that April might merely be a short lived reprieve for dwelling homeowners, because the financial institution waits for extra knowledge.
“The board expects that some additional tightening of financial coverage could be wanted to make sure inflation returns to focus on,” he stated on Tuesday.
“The choice to carry rates of interest regular this month supplies the board with extra time to evaluate the state of the economic system and the outlook, in an surroundings of appreciable uncertainty.”
Upcoming inflation and jobs knowledge pivotal
Rates of interest at the moment are on maintain for the primary time since Might 2022 at 3.6 per cent, with economists saying upcoming knowledge on inflation and the roles market might be pivotal in deciding whether or not the RBA hikes charges subsequent month.
An ongoing easing in inflation, which has been evident in monthly datamight mood RBA urge for food once more in Might, sparking one other pause.
However ought to worth rises proceed to broaden amid a resilient jobs market, then specialists do not anticipate the RBA to hesitate in resuming price hikes.
Additionally key might be how the a whole bunch of hundreds of households who’ve but to really feel any price hikes as a result of their mortgages are fastened will react when these loans revert to market rates in 2023, the RBA stated on Tuesday.
Sean Langcake, head of macroeconomic forecasting at BIS Oxford, stated one other price hike is probably going in Might as a result of inflation is “nonetheless far too excessive”.
“A pause does not imply a peak,” he stated.
“The assertion nonetheless talks when it comes to how a lot additional charges might go up.”
EY chief economist Cherelle Murphy stated the RBA had paused rates of interest in April, however “hawkishly” amid ongoing concern about above-target inflation.
“The unemployment price fell again to three.5 per cent in February, and full-time employment picked up strongly – that means the roles market stays tight and wages below upward strain,” she stated.
Extra mortgage ache on the horizon?
Commonwealth Financial institution chief economist Gareth Aird nonetheless expects another 0.25 proportion level price hike subsequent month (Might), saying on Tuesday that April’s assertion mirrored a altering tone from the central financial institution.
“Within the March assertion accompanying the board choice it was said that, ‘the board expects that additional tightening of financial coverage might be wanted to make sure that inflation returns to focus on’,” Mr Aird stated in a word.
“At the moment that sentence was modified to, ‘the board expects that some additional tightening of financial coverage could be wanted to make sure that inflation returns to focus on’,” he added.
“These modifications point out that the RBA board is much less satisfied that they may hike the money price once more.”
ANZ Financial institution senior economist Felicity Emmett stated extra price hikes are nonetheless seemingly, however that the RBA was shifting to a place the place additional rises can be extra knowledge dependent.
“We proceed to suppose inflation will show persistent sufficient to require the RBA to tighten financial coverage additional within the months forward,” she stated.
“In our view, the query will not be a lot considered one of ‘the place’ the RBA will get to (we nonetheless favor 4.1 per cent because the terminal price), however ‘when’ it will get there.”
Impartial economist Nicki Hutley provided a distinct view, suggesting the “central case” was that price hikes at the moment are over, with the RBA now prone to proceed pausing so long as inflation does not begin rising once more.
“My intestine feeling is that we do not want any extra and we have seen the final of them,” she stated. “It could be silly to write down off the likelihood.
“An additional hike would danger pushing us off that slender path right into a recession.”
