Australian homeowners are facing a fresh blow. The Reserve Bank released the minutes from its board meeting earlier this month. More interest pain for mortgage holders could be on the way. The Reserve Bank of Australia indicated the possibility of further interest rate rises. The RBA on Tuesday released the minutes of its April meeting where it left the official cash rate on hold after 10 consecutive increases. The minutes showed the central bank mulled over whether hitting the pause button or a 25 basis point rise to 3.85 per cent was appropriate.
In the end, homeowners were spared from another increase. But the RBA warned it didn’t spell the end of hikes altogether. “Members observed that it was important to be clear that monetary policy may need to be tightened at subsequent meetings. And that the purpose of pausing at this meeting was to allow time to gather more information,” the minutes said.
The decision to keep the cash rate at 3.6 per cent in April appeared to be a close call. The central bank flagged concern that strong population growth and wage increase could lift inflation.
RBA Governor Philip Lowe previously indicated rates could rise again. Picture: NCA NewsWire / Gary Ramage
“This case was again found on the observation that inflation remains too high. The labour market was very tight,” the minutes says. Fresh quarterly consumer price index data will be released later this month. In the December quarter, it jumped to 7.8 per cent over the year. It is the highest since the 1990s.
What are the Board Members Saying?
Board members noted the forecasts by the RBA, conditioned on a further tightening of monetary, did not have inflation returning to its target range of 2 to 3 per cent until mid-2025.
The central bank is also concerned an upgrade in population growth projections would put “significant pressure” on demand. Especially for housing. “Higher immigration might reduce wage pressures. Members note that the net effect of a sudden surge in population growth could be somewhat inflationary for a period,” . However, the board ultimately decided to hold steady to give the central bank more time to assess the impact of the most aggressive tightening of monetary policy since the 1980s.
“Members recognised the strength of both sets of arguments. But on balance, agreed that there was a stronger case to pause at this meeting. They reassessed the need for further tightening at future meetings,” the minutes said.
The board will meet again on May 2. This Post Is Originally From: news.com.au
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