After a run of 10 consecutive interest rate rises, those planning to apply for finance may be extremely pleased to know that keeping rates steady is back in the Reserve Bank of Australia (RBA) Board’s considerations. The prospect of a halt or a pause to rate rises was initially raised in the minutes of the Board’s December monetary policy meeting. But that option was not included in the February meeting discussions, based on the minutes.
But the prospect of a pause to these interest rate rises is now under consideration with the Board agreeing to consider if the economic conditions suit such a move at its 4 April meeting. This was revealed in the minutes of the March meeting which were posted to the RBA website this past week.
Reading the complete minutes may be of interest to some people, especially business owners, as the discussions include a range of topics covering many aspects of both the Australian and international economy. Points of discussion may be picked-up which specifically relate to your sector and may provide clarity as to the outlook for the industry.
For individuals and businesses planning finance, Jade Finance has extracted key discussion points re interest rates from the RBA Board’s March meeting.
Key Discussion Points – RBA Board March Meeting
- Internationally, inflation is still very high and exceeds the central bank targets in many advanced economies.
- Inflation in Australia also still too high.
- January figures as released by the Australian Bureau of Statistics (ABS) show a rise in unemployment. The seasonal nature of January data has potential for volatile data. The Board agreed to wait for the February data to see if the January increase indicated a change or just a seasonal anomaly.
- The absence for now 3 years in any growth in productivity was of particularly concern to the Board. This has meant that businesses have not had a productivity increase to offset the increasing labour costs.
- The productivity growth issue may cause the rate of inflation to stay high for longer.
- Based on the Consumer Price Index for January, the outlook is for inflation to ease in the March quarter. However, it is noted that figures for individual months can be volatile.
- The financial market’s expectations for how high the cash rate will go have change.
- The most important figures that have been released in the past month have been softer than expected. These include the GDP figures, unemployment rate, wages growth and inflation. The Board discussed whether this was a sign of weaker demand than was assumed. It was decided that there were reasons not to place too much weight on the data for just the single period.
- The Board decided that another interest rates increase – tightening of monetary policy, was required as inflation rate still remaining high and forecast to stay over the target for another two years.
- The outlook for interest rates from the Board is that more rate rises will likely to be required.
- The Board discussed how interest rates had reached ‘restrictive territory’ and discussed the pressures this was causing.
- The outlook continues to be uncertain for the Australian economy.
- The Board considered the current rates position, the uncertain outlook and other economic indicators and agreed that the situation was nearing the point when it would be apt to put the cash rate on hold.
- The Board discussed the lag in the time between when changes were made to monetary policy (rate rises) were actually realised in the data and the complications that presented in assessing the outlook.
- The Board agree that at the next monetary policy meeting, the case for holding the cash rate (no rate rise) would be discussed.
As was announced on 7 March, the Board decided on a further 0.25% increase in the cash rate at that meeting.
What this means for lending interest rates
For individuals planning loans for goods such as new cars and for business owners with plans underway to acquire new assets with finance, these discussions essentially mean the interest rates outlook remains uncertain. There is a possibility that in April rates could be left unchanged and also the possibility that we could see a further increase.
Any changes to the cash rate can have impacts on consumer and business finance interest rates as banks and lenders pass on their increased costs to customers. With further rises flagged, it may be concluded that we will see more increases in the coming months. That is the opinion of some of the major banks, though Westpac reduced its forecast for the peak of the cash rate to 3.85% recently.
What is sure to influence the Board’s April decision is the problems emanating from the US banking sector and with Credit Suisse in Switzerland. These issues have recently seen both the US Federal Reserve and the UK’s central bank increase rates.
The next meeting of the RBA Board is 4 April.
To secure cheaper interest rates on personal loans and business finance, contact Jade Finance 1300 000 008
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.