The Reserve Bank has left interest rates unchanged but hinted there may be more pain for struggling home borrowers hoping for some relief soon.
Gov. Michele Bullock’s monetary policy board said inflation was taking too long to moderate, and new forecasts show price pressures will remain elevated through 2025.
“Recent information indicates that inflation continues to moderate, but is declining more slowly than expected,” the Reserve Bank said on Tuesday afternoon.
The Reserve Bank also suggested another rate hike was still possible despite borrowers already facing the most severe pace of monetary policy tightening since 1989.
“The board expects it to be some time before inflation is sustainably in the target range and will remain alert to upside risks,” he said.
“The path of interest rates that best ensures that inflation returns to its target within a reasonable period of time remains uncertain and the board is not ruling anything in or out.”
The RBA cash rate is already at a 12-year high of 4.35 per cent and borrowers are paying 68 per cent more a month than two years ago, following 13 interest rate rises in 18 months.
The Reserve Bank has left interest rates unchanged but hinted that more pain is possible (Governor Michele Bullock pictured)
But the RBA has updated its forecasts, predicting inflation will remain above its target of two to three per cent until the end of 2025.
A new monetary policy statement, also released on Tuesday, forecast headline inflation would only moderate to 3.2 percent by June 2025, down from 3.6 percent in the March 2024 quarter.
Annual underlying measures of inflation, excluding major price movements, were above the 4 per cent level in the March quarter.
This has caused the futures market to rule out the prospect of a rate cut in 2024 and predict relief will be postponed until the second half of 2025.
The RBA’s updated forecasts also saw the trimmed average measure of inflation fall to 3.1 per cent by June 2025, down from 4 per cent in March this year.
However, the Reserve Bank continues to expect both headline and core inflation to fall to 2.8 per cent by December 2025.
Unemployment was only forecast to rise to 4.3 percent by June 2025, up from 3.8 percent in March, raising fears that wages could fuel inflation.
Treasurer Jim Chalmers issued a statement Tuesday afternoon promising to ease inflationary pressures in the upcoming May 14 budget.
“Our main short-term objective remains to reduce inflation and help alleviate pressures on the cost of living,” he said.
The May budget will be carefully calibrated to economic circumstances, striking the right balance between controlling inflation, easing cost of living pressures, supporting sustainable growth and building fiscal buffers in an uncertain global environment.’
But the RBA has updated its forecasts, predicting inflation will remain above its target of two to three per cent in 2025 (pictured, a file image).
A borrower with an average mortgage of $600,000 has, since May 2022, seen their monthly mortgage payments increase 67.7 percent to $3,868, up from $2,306.
That means annual payments are now $18,744 higher than two years ago, based on a Commonwealth Bank variable rate rising to 6.69 per cent, up from 2.29 per cent for those with a 20 per cent mortgage deposit. hundred.
Australian mortgage holders have been hit by the most aggressive rate increases since 1989, causing a cost of living crisis for the country’s 3.8 million households managing a mortgage.
Treasurer Jim Chalmers issued a statement Tuesday afternoon promising to ease inflationary pressures in the upcoming May 14 budget.