Rates are on the rise once again as the official cash rate went back up to 4.10% following today’s 0.25% hike by the RBA.
The central bank said in its statement that it was a close call (five board members voting for a rise, and four for a pause). It added that the situation in the Middle East was a significant factor in raising rates today.
‘Information since the February meeting suggests that some of the increase in inflation reflects greater capacity pressures.
‘In addition, the conflict in the Middle East has resulted in sharply higher fuel prices, which, if sustained, will add to inflation.
‘As a result, the Board judged that there is a material risk that inflation will remain above target for longer than previously anticipated,’ said the RBA.
The RBA rarely hikes rates consecutively – largely because it takes time for any such change to work through the economy. This makes today’s news a clear sign that the board wants to get on top of inflation as quickly as possible.
For example, headline CPI held at 3.8% in January, unchanged from December on a seasonally adjusted basis. However, trimmed mean inflation, the RBA’s preferred underlying measure, edged up from 3.3% to 3.4%.
And of course, oil prices are surging following the conflict in the Middle East, which will affect the CPI.
So, inflation is still above the RBA’s preferred 2–3% range, with the board keen to muzzle it as soon as possible.
Looking back to February, the minutes of the RBA board meeting revealed concerns even then that inflation may remain “more persistent” than it had forecast last year.
And that was before the conflict began.
CBA and NAB economists now expect the RBA to lift the cash rate again at its May meeting, taking it to 4.35%.
‘The Board judged that inflation is likely to remain above target for some time and that the risks have tilted further to the upside, including to inflation expectations. It was therefore appropriate to increase the cash rate target,’ noted the RBA.
And if you look at lenders, it’s been reported that in the past two weeks that 27 lenders have hiked at least one fixed rate.
Hopefully, your St Patrick’s Day festivities haven’t been spoiled too much by today’s news.
However, should we see a rate drop from the RBA in the future, you can find out more in our recently published article on preparing for a rate cut.
If you would like to review your mortgage rate, contact Mortgage Broker Melbourne. We are one of the most positively reviewed mortgage brokers in Melbourne.
Additionally, we can offer you tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household costs.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!