PERSONAL FINANCE | RBA Cash Interest Rate Update
RBA Cash Interest Rate Update The Reserve Bank of Australia met on 01 February. At its meeting today, the Board decided to maintain the cash rate target at 0.1% for the 14th month in a row. The cash rate is the interest rate on unsecured overnight loans between banks. It is the near risk-free benchmark rate for the Australian dollar. In a statement by Philip Lowe, Governor of the Reserve Bank, the Board held that the Australian economy remains resilient and spending is expected to pick up as case numbers trend lower. The announcement confirms the Board’s decision that the RBA will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The RBA's central forecasts are: • the unemployment rate to fall to below 4 per cent later in the year and to be around 3¾ per cent at the end of 2023 •
GDP* growth of around 4¼ per cent over 2022 and 2 per cent over 2023
•
the underlying inflation to increase further in coming quarters to around 3.25%, before declining to around 2.75% over 2023 as the supply-side problems are resolved and consumption patterns normalise.
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The statement notes one source of uncertainty is the persistent disruptions to supply chains and distribution networks and their ongoing effects on prices. It is also uncertain how consumption patterns will evolve and how this will affect the balance of supply and demand, and hence prices. To date the banks have held their interest rates at an all time low. While the RBA cannot confirm when interest rates will rise again, they have forecast a rise towards the end of the year. The graph on the opposite page is from the RBA and shows just how low the interesst rates are. Notice how high the interest rates were in the 1990's. If you think your parents and grandparents enjoyed low housing costs, look at what their repayments must have been with the RBA cash rate at close to 18% in 1990, the banks were charging over 20% at that time.
Note: GDP or Gross Domestic Product in Australia is the total market value of all goods and services produced within Australia in a given period of time.
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