Invest
Rate hike ‘unlikely’, but no place for complacency
Recent analysis of economic figures argues that the Reserve Bank of Australia has little choice but to hold the official cash rate at its current record low of 1.50 per cent.
Rate hike ‘unlikely’, but no place for complacency
Recent analysis of economic figures argues that the Reserve Bank of Australia has little choice but to hold the official cash rate at its current record low of 1.50 per cent.
Slow wage growth and sluggish inflation figures will influence the Reserve Bank of Australia’s (RBA) decision to hold the cash rate, according to RateCity’s Rate Forecaster.
The analysis revealed that 22 out of 23 economic indicators pointed to a cash rate hold.
RateCity money editor Sally Tindall believes that wage growth and inflation figures need to change before the RBA considers a rate hike.
“We know the direction for interest rates is up, but until inflation gets over the coveted 2 per cent mark, it’s unlikely the RBA will hike rates,” she said.
“Lack of wages growth is another culprit. Without substantive increases in pay, it’s unlikely the RBA will hike rates, particularly with household debt at a record high.”
Ms Tindall noted that a rate hold would be good news for borrowers, but she warned against complacency.
“The lack of movement in rates means debt-laden home owners continue to enjoy Australia’s longest run of record low interest rates, but that does not mean they should be complacent,” Ms Tindall said.
“For many people, now is an opportune time to refinance and get ahead on their mortgage repayments so they have a buffer for when interest rates eventually rise.”
The money editor also noted the low variable rates on offer for borrowers.
“There are currently dozens of lenders offering variable rates below 4 per cent, starting from 3.39 per cent,” Ms Tindall said.
The RBA will hold a board meeting on Tuesday, 6 February, to determine its cash rate decision.
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