The Reserve Bank of Australia has lifted the nation’s official cash rate to 4.1 per cent – a 25 basis point jump which takes it above four per cent for the first time since April 2012.
The Reserve Bank of Australia has lifted the nation’s official cash rate to 4.1 per cent – a 25 basis point jump which takes it above four per cent for the first time since April 2012.
Today’s rise is the 12th from 13 RBA meetings since May 2022. Economists were split on the action the RBA would take ahead of today’s meeting.
In his official statement on the decision, RBA governor Philip Lowe said the nation’s 7 per cent inflation rate remained too high, and the increase would provide greater confidence of a return to target range of two-to-three per cent within a reasonable timeframe.
“Recent data indicate that the upside risks to the inflation outlook have increased and the board has responded to this,” he said.
“While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas.
“Unit labour costs are also rising briskly, with productivity growth remaining subdued.”
Mr Lowe warned that further tightening of monetary policy may be required pending the evolution of the economy and inflationary pressures.
“The board will continue to pay close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market,” he said.
The RBA noted that household spending was substantially slowing though house prices were on the up.
Speaking on today’s news, REA Group’s PropTrack senior economist Eleanor Creagh said the RBA’s May cash rate rise had clearly not subdued the real estate market.
“The decision by the Reserve Bank to lift the cash rate in May did not deter the current home price rebound, in fact it was the opposite,” she said.
“After five consecutive months of national home price growth, stronger market conditions are more pervasive, and price rises are more widespread.
“Strong demand relative to stock on market is seeing home prices lift, and offsetting the downward pressure from continued interest rate rises.”
“The pace of price rises may slow with interest rates lifting further, particularly if the flow of new stock coming to market increases. However, the factors precipitating stronger housing demand – population growth and tight rental markets – remain alongside an undersupply of new homes.
“This may see home prices continue to lift in the months ahead.”
CoreLogic Australia said it expected today's "line-ball" call would take some steam out of property markets.
"With continued strong demand from a surge in overseas migration, a slow return to pre-pandemic household size in the capital cities, and persistently low levels of advertised supply, the June rate hike may only serve to take some steam out of the recovery trend in housing values, rather than reverse recent gains," head of research Eliza Owen said.
The Australian dollar’s value against the greenback rose following today’s announcement, while the ASX 200 dipped sharply and is currently around 1 per cent lower.
More to come...
