Mortgage holders can breathe a sigh of relief as the Reserve Bank of Australia has kept interest rates on hold.
Board has today decided to leave the cash rate target unchanged at 4.10 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.00 per cent.
Interest rates have been increased by 4 percentage points since May last year.
Reserve Bank said in a statement, “The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so. In light of this and the uncertainty surrounding the economic outlook, the Board decided to hold interest rates steady this month.”
“This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook.”
Australia’s central bank moved to the sidelines in July after 12 interest rate rises in the tightening cycle, leaving the official cash rate at 4.1 per cent.
The ASX jumped 30.9 points, or 0.43 per cent, within one minute of the RBA announcement.
RBA governor Philip Lowe said keeping interest rates steady would give the board more time to assess the state of the economy.
But in a statement, Dr Lowe kept a reference to more tightening if the situation calls for it, which he included last month.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time-frame, but that will depend upon how the economy and inflation evolve,”
he said.
A sharp fall in the monthly consumer price index fed into the July decision, but the governor said inflation was “still too high and will remain so for some time yet”.
Dr Lowe also flagged signs of a slowing economy and a labour market starting to lose some heat.
Household consumption was also highlighted as a “significant source of uncertainty”.
“The combination of higher interest rates and cost-of-living pressures is leading to a substantial slowing in household spending,”
Dr Lowe said.
The 400 basis points of interest rate hikes so far have been felt keenly by borrowers.
The aggressive tightening has added more than $1000 to monthly repayments on the standard variable rate home loan compared with April last year, before interest rates started going up.
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