Six Consecutive Rate Rises - State of the Market
Philip Lowe, govenor of the Reserve Bank of Australia (RBA) increased the official interest rate by 0.25 percentage points, being the the sixth consecutive rise since May, taking the cash rate from 0.1 per cent to 2.6 per cent.
This latest increase was below economist and market expectations of a 0.5 percentage point increase. Investors now expect a cash rate of 3 per cent by year’s end, down from 3.3 per cent, and a peak rate of 3.5 per cent next year, down 0.6 percentage points from late-last week – a welcome relief for borrowers.
Economists shared mixed views on what the RBA’s step-change meant for future increases; some suggested it would simply delay the inevitable while others said the bank was close to being done.
RBA governor Philip Lowe said despite the slowing pace, inflation was still too high, and the board remained “resolute in its determination to return inflation to target and will do what is necessary. “Price stability is a prerequisite for a strong economy and a sustained period of full employment,” Dr Lowe said in his post-RBA board meeting statement. “The priority is to return inflation to the 2–3 per cent range over time. It is seeking to do this while keeping the economy on an even keel.