The head of the Reserve Bank of Australia will front the media after hitting the pause button on its most aggressive interest rate hiking cycle in decades.
Governor Philip Lowe’s public appearance at the National Press Club in Sydney on Wednesday should offer more insights into the RBA’s positioning on future cash rate decisions, with Dr Lowe keeping further hikes on the table if the situation calls for it.
The decision at Tuesday’s April meeting of the Reserve Bank board to keep interest rates on hold at 3.6 per cent followed 350 basis points of tightening since May last year.
The 10 hikes in a row have jacked up borrowings costs for businesses and mortgage holders, with thousands of households with fixed-rate home loans due to feel the full weight of the rate increases when these offers expire this year.
Finance Minister Katy Gallagher said while the pause would bring some reprieve, the federal government understood people were still under pressure financially.
“There are a number of mortgage holders – about one in five – that will face coming off those fixed terms and into variable rates throughout the course of this year,” she told ABC Radio National on Wednesday.
“We know that’s going to be pretty challenging for those households.”
While the RBA is keeping rates on hold to observe the lagging effects of policy tightening to date, ANZ economists expect more hikes to come.
ANZ economist Felicity Emmett said incoming quarterly inflation data, due on April 26, would reveal persistent-enough inflation to prompt further tightening.
“In our view, the question is not so much one of ‘where’ the RBA gets to – we still favour 4.1 per cent as the terminal rate – but ‘when’ it gets there,” she wrote in an analysis.
She said the RBA board likely opted for a pause in the interests of preserving high employment levels.
Australian Council of Trade Unions president Michele O’Neil welcomed the decision to keep the cash rate on hold and said the RBA should remain focused on its full employment objective.
“Between the RBA and corporate profiteering, the average Australian is bearing the brunt of an inflationary environment they did not cause and have no control over,” she said.
Australian Chamber of Commerce and Industry chief of policy and advocacy David Alexander said small businesses would also welcome the interest rate breather.
“While today’s decision is encouraging, the challenge for policymakers lies in navigating the narrow path towards a soft economic landing and addressing the inflation challenge,” he said.
– AAP
