At its monetary policy meeting on Tuesday 7 March, the Reserve Bank of Australia (RBA) Board announced a further increase for the cash rate of 0.25%. This makes 10 in a row increases in interest rates since the Board commenced tightening monetary policy in May last year. But there may be better news ahead with the situation getting closer to being suitable for pausing these increases. Dr Philip Lowe, the RBA Governor, made this comment in a keynote business summit speech the day following the Board meeting.
In the speech, Dr Lowe also elaborated further on points raised in the 7 March Monetary Policy statement. Offsetting the optimism of the ‘getting close’ comment was the mention that further rate increases are likely in the coming months. The priority of the Board is to bring the high rate of inflation, 7.4% as per latest CPI from the Australian Bureau of Statistics (ABS), back to the 2-3% target. As mentioned by Dr Lowe, interest rate changes is the tool available to the RBA to achieve this objective.
For those considering applying for loans and finance, an important tool available to ensure cheaper interest rates is using our broker style lender services as lenders in consumer loans and business finance follow the RBA decision with their own rises.
To update on the outlook and forecast for inflation, the economy and especially interest rates, we’ve extracted and summarised a number of key points from Dr Lowe’s presentation and the March Monetary Policy Announcement.
RBA March Monetary Policy Statement
The statement announcing the March cash rate decision included the following points:-
- Moderation in global inflation but it will be a while before rates return to targets.
- Inflation in Australia appears to have reached its peak in the December quarter, based on inflation figures as released by the ABS. Weaker demand and global activities are expected to result in a moderation in prices for goods but prices for services are still very high. Rents in particular are increasing at very high rates.
- Inflation forecast to fall for 2023 and 2024 but not near the top end of the target range, 3%, until around the middle of the following year, 2025.
- Rate of economic growth has slowed with only a modest 0.5% increase in GDP for quarter ending December 2022 and 2.7% for 2022. Softer outlook for construction but investment by business has a positive outlook.
- The risk of a dangerous spiral of prices-wages is considered low by the Board. But members will be remaining highly alert to the possibility and watching data and pricing behaviour of businesses closely.
- Uncertainties continue, in particular about how quickly the levels of spending in Australia reflect the global trends and respond to the recent rate increases. Based on the uncertainty, the Board sees a different scenarios that could play out.
- With the priority of reducing inflation, the Board said that more interest rates increases would be likely required.
This statement typically is quite brief. Further insights into the Board’s thinking will be revealed when the fuller transcript of the meeting – the Minutes, are available later this month.
Comments by Dr Philip Lowe
While we await the Minutes, Dr Lowe did provide further elaboration and insights in his presentation to the Business Summit convened by the AFR. As a keynote speech it was lengthy with supporting graphs and charts. Those interested can read the complete presentation which is posted on the RBA website.
As a brief summary, the points raised which are relevant to interest rates and monetary policy included:-
- The damaging effects of high rates of inflation were detailed.
- The RBA is using interest rates to ensure the current inflationary episode is temporary.
- Increases in rates work through many channels but it can take some time for effects to be evident.
- Interest rates are now in ‘restrictive territory’.
- Further increases are expected.
- The situation is getting closer to when a pause in increases would be appropriate. No timeframe was given. Decisions will be made based on the data which is available at the time and on the outlooks.
The next interest rates decision is due in early April.
Interest Rates Outlook and Possibilities
As has occurred following each of the previous RBA rate decisions, the lending markets are expected to respond with varying increases to rates on different loan products. But, those responses will be varied depending on the competitiveness of the lender, exposure to certain markets, confidence and outlook for key lending areas, the forecasts of the lenders’ analysts and their internal policies and costs.
Jade Finance is accredited with multiple lenders in both consumer and commercial loans and we source the cheapest interest rates from across this large base. We have access to more lenders to save customers time and hassle in securing cheaper rates on car finance, recreational and leisure goods loans, truck loans and business asset finance.
Rates look set to be increased further. Buyers are strongly encouraged to move swiftly where possible to finalise purchases with finance before the next increases.
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.