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The Reserve Bank leaves interest rates unchanged in a major victory for millions of homeowners in one of Philip Lowe’s last acts as governor
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The Reserve Bank left interest rates unchanged at 4.1 percent, their highest level in 11 years, for the third straight month.
Philip Lowe, chairing his final meeting as RBA governor, left the key rate unchanged on Tuesday, bringing relief to millions of home borrowers struggling with a cost of living crisis.
“Inflation in Australia is past its peak,” he said.
Dr Lowe, whose seven-year term ends on September 17, has presided over the most aggressive pace of monetary policy tightening since 1989, with 12 interest rate hikes since May 2022.
In his latest monthly statement, he defended his legacy, having suggested in 2021 not to raise rates until 2024 “at the earliest”.
“Rising interest rates are helping to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” he said on Tuesday.
The Reserve Bank left interest rates unchanged at 4.1 percent, their highest level in 11 years, for the third straight month. Philip Lowe (left with MP Michele Bullock) chaired his final meeting as RBA Governor
“In light of this and the uncertainty surrounding the economic outlook, the board has again decided to hold interest rates steady this month.”
In just over a year, Australian mortgage borrowers have seen their monthly repayments increase by 63 per cent.
As recently as May 2022, a borrower with an average mortgage of $600,000 owed $2,306 a month, when variable rates still had a “two” in front.
That same borrower would now pay $3,769 per month at a floating rate of 6.44 percent.
After peaking at 8.4 percent late last year, the monthly measure of annual inflation has moderated, falling to 4.9 percent in July, the lowest level since February 2022, against 5.4 percent in June.
With inflation still well above the Reserve Bank’s 2-3% target, the Australian Stock Exchange’s 30-day interbank futures market expects the next move to be a rate cut. end of 2024.
A break in rates on Tuesday was considered an 86 percent chance, compared to a 14 percent chance for a rate cut.
Since peaking at 8.4 percent late last year, the monthly measure of annual inflation has moderated, falling to 4.9 percent in July, the lowest level since February 2022, down from 5.4 per cent in June (pictured is a shopper from Woolworths in Sydney’s east). )
No bets were taken on a rate hike for September, but the Reserve Bank left open the possibility of another rate hike.
“Further tightening of monetary policy may be needed to ensure that inflation returns to its target within a reasonable timeframe, but this will continue to depend on data and changing risk assessments,” he said. he declares.
The RBA still expects consumer price index inflation to remain high until the end of 2025.
“Inflation is still too high and will remain so for some time to come,” he said.
“While goods price inflation has eased, the prices of many services are rising rapidly.
“Rent inflation is also high.
“The central forecast is that CPI inflation will continue to decline and return to the target range of 2 to 3 percent by the end of 2025.”