Reserve Bank news

Supply side shocks have pushed inflation within the Reserve Bank’s target range for the first time in six years, forcing RBA governor Philip Lowe to abandon a key element of his pandemic response plan.

The Reserve Bank of Australia has left policy settings unchanged at its October meeting, while also calling on banks to maintain sound lending practices in light of growing risks in the housing market.

The Reserve Bank of Australia will be moving forward with its plans to reduce its weekly bond purchases this month, though it intends to extend the program until at least February 2022.

The Reserve Bank of Australia will be going forward with its plans to scale back its bond purchasing program in September, despite the economic fallout caused by the delta outbreak.

The Reserve Bank of Australia kept official interest rates on hold at its monthly board meeting this afternoon. The cash rate currently sits at 0.1%, where it has remained since November 2020.In his post meeting statement, RBA governor Philip Lowe outlined the Bank’s revised set of economic forecasts. It now expects GDP to grow by 4¾% over 2021 and 3½% over 2022.“A pick-up in business investment is expected and household spending will be supported by the strengthening in balance sheets over the past year,” Lowe said.“This recovery is especially evident in the strong growth in employment, with the unemployment rate falling further to 5.6 per cent in March and the number of people with a job now exceeding the pre-pandemic level.”Lowe once again ruled out a tightening of monetary policy until the labour market recovers and inflation is sustainably within the 2 to 3% target band.Any pressure to change course was eased last week, after consumer price index data for the March quarter saw headline inflation rise by just 0.6%. The annual rate of inflation also undershot expectations, increasing just 1.1%.Underlying inflation has not been within the RBA’s target band since late 2015. Today, Lowe said he expects it to remain below the 2% mark until mid 2023.Deputy RBA governor Guy Debelle will provide more insight into the Bank’s thinking on Thursday, ahead of the release of the RBA’s quarterly statement on monetary policy later in the week.RELATED: May home loan snapshot: Longer term fixed rates are risingProperty values continue to climb, but the pace of growth has eased as of late. According to CoreLogic’s national home value index, prices rose by 1.8% in April, down from the 32-year high of 2.8% that was recorded in March.While the lift in property values is welcome news for the RBA, CoreLogic research director Tim Lawless points out that younger Australians face mounting difficulties when saving to buy a home.“With housing prices rising faster than incomes, it’s likely price sensitive sectors of the market, such as first home buyers and lower income households are finding it harder to save for a deposit and transactional costs,” he said.Those hoping to secure a low rate on longer terms will also have to contend with rising fixed rates.Following a trend we first observed in March, 15 lenders in the Mozo database increased rates for 4- or 5-year terms throughout April. The average 4-year fixed rate now sits at 2.46% p.a. (up 0.9% over the month).Short-term fixed rates continue to move in the opposite direction. Notably, bcu reduced its 1-year fixed rates by 0.31%, bringing its owner occupier offering to 1.67% p.a. (3.85% p.a. comparison rate*).For more information about mortgage and lending trends, head over to our home loan statistics page. And for an idea of where interest rates currently sit, visit our home loan comparison page.

The Reserve Bank of Australia and the Australian Prudential Regulation Authority have been given a combined grade of D minus for their environmental policies, in a new report from Positive Money.

The Reserve Bank of Australia kept official interest rates at 0.1% in its April meeting this afternoon, as Australia’s economic recovery proceeds with only the occasional minor drawback.In his post-meeting statement, RBA governor Philip Lowe said current policy settings have helped prop up employment and aggregate demand, but there are still uncertainties regarding the outlook.“GDP increased by a strong 3.1% in the December quarter, boosted by a further lift in household consumption as the health situation improved. The recovery is expected to continue, with above-trend growth this year and next,” he said.“Nevertheless, wage and price pressures are subdued and are expected to remain so for some years. The economy is operating with considerable spare capacity and unemployment is still too high.”The yield on the 3-year Australian Government bonds also remained unchanged, along with the parameters of the Board’s QE program and term funding facility.“The initial $100 billion government bond purchase program is almost complete and the second $100 billion program will commence next week,” Lowe said.“Beyond this, the Bank is prepared to undertake further bond purchases if doing so would assist with progress towards the goals of full employment and inflation.”RELATED: Autumn property, how to stay ahead as the auction market heats upUltra-low interest rates have lit a fire under the residential property market, with CoreLogic’s home value index climbing 2.8% in March — the fastest rate of growth recorded in 32 years. While the RBA and regulatory bodies are alert to runaway prices, they haven’t shown much interest in stemming the tide. At a recent economic forum, APRA chair Wayne Byres said the regulator has no mandate to target housing affordability.Instead, it will be keeping a close eye on lending standards, particularly the share of high LVR and high debt-to-income loans. So far, it maintains that the rate of risky lending has not strayed from historical averages.The drop in the number of mortgage deferrals is also promising. The latest figures from APRA show that as of 28 February, only 0.5% of all loans - or $14 billion worth - was still deferred.For the RBA, a booming property market isn’t so much a problem to be contained but a necessary ingredient to fast track economic growth and deliver inflation within the 2 to 3% target range. Lowe once again ruled out an increase to the cash rate until that target has been reached, saying the labour market must first improve enough to start generating wage increases. That means variable rates will remain low for some time yet, but a different picture is emerging on the fixed rate front. Last month, a number of banks quietly increased 4- and 5-year fixed rates in response to rising funding costs.That included the Commonwealth Bank, which lifted 4-year rates on its Fixed Rate Wealth Package by 20 basis points. It now comes with 2.19% p.a. fixed rate (3.73% p.a. comparison rate*).More increases to long-term fixed rates are expected in the coming months as banks prepare for the end of the RBA’s term funding facility later this year.For more information about mortgage and lending trends, head over to our home loan statistics page. And to see where interest rates currently sit, visit our home loan comparison page.

The Reserve Bank of Australia handed down its second policy decision of the year this afternoon, announcing it will keep official interest rates at their current setting of 0.1 per cent.After a wild few weeks which saw bond yields surge on the view the economy would recover sooner than expected, RBA Governor Philip Lowe doubled down on the Bank’s outlook for inflation and unemployment.“Further progress in reducing spare capacity is expected, but it will be some time before the labour market is tight enough to generate wage increases that are consistent with achieving the inflation target,” he said.“The Board does not expect these conditions to be met until 2024 at the earliest.”Under the RBA’s central scenario, unemployment is expected to remain at 6 per cent at the end this year and 5½ per cent at the end of 2022. Inflation will hover around 1¼ per cent over 2021 before increasing to 1½ per cent over 2022.Lowe said current monetary policy settings have delivered substantial aid to the economy by keeping borrowing costs low, and bond purchases made earlier this week have helped ensure the smooth functioning of the market.“To date, a cumulative $74 billion of government bonds issued by the Australian Government and the states and territories have been purchased under the initial $100 billion program,” he said.“A further $100 billion will be purchased following the completion of the initial program and the Bank is prepared to do more if that is necessary.”RELATED: Property prices rise at fastest pace in 17 yearsThe rapid growth in the property market is expected to continue on the back of record low interest rates, raising concerns that first home buyers could be shut out as property prices surge.But unlike the Reserve Bank of New Zealand, which recently agreed to consider housing affordability when setting monetary policy, the RBA won’t be sounding any alarms so long as lending standards remain sound.Last month, CoreLogic’s monthly home value index saw prices in Australia jump up by 2.1 per cent, marking the largest month-on-month change the property research firm has recorded since August 2003. Gains were distributed fairly evenly across the country, with regional markets posting average increases of 2.1 per cent and capital city markets rising by an average of 2 per cent.Analysts from the major banks are now confident we’ve passed the bottom of this property cycle, with Westpac the latest to upgrade its forecasts. It now predicts a 20 per cent increase in property prices over the next two years, which would see Sydney values rise by more than $200,000.This momentum will be supported by low fixed rates in particular. The latest ABS lending indicators show new fixed rate commitments for January 2021 were more than 200 per cent higher than they were before the RBA began its bond purchasing activities last year.According to research by Mozo, 29 per cent of the major banks’ mortgage books are now fixed, an increase of 12 per cent over the past financial year.Among lenders we track, the average 2-year fixed rate currently sits at 2.32% p.a., almost a full percentage point lower than the average variable rate of 3.29% p.a. While cuts to variable rates continue to flow through, lenders look to be competing mainly on the fixed rate front.Greater Bank currently occupies the top spot in our database, offering owner occupiers 1.69% p.a. (3.49% p.a. comparison rate*) on 1-year terms for its Great Rate Home Loan. Online lender UBank has also extended its UHomeLoan discount offer, which is among the lowest rates on the market. Owner occupiers who apply before 29 April 2021 can receive a 1.75% p.a. fixed rate (2.22% p.a. comparison rate*) on 3-years terms.For more information about mortgage and lending trends, head over to our home loan statistics page. And if you’re in the market for a home loan, visit our home loan comparison page, or browse the selection below.

The Reserve Bank of Australia decided to leave interest rates unchanged at its first meeting of the year this afternoon. The cash rate currently sits at 0.1 per cent, where it has remained since November 2020.In his post-meeting statement, RBA Governor Philip Lowe said that while the path to recovery will be uneven, "there are better prospects for a sustained recovery than there were a few months ago."The Board forecasts GDP growth of 3½ per cent over both 2021 and 2022, but a backwards slide on the health front “would delay the recovery and the expected progress on reducing unemployment.”“On the other hand, it is possible that further positive health outcomes would boost consumer spending and investment, leading to stronger growth than is currently expected” said Lowe.The RBA slashed interest rates to emergency lows last year to shore up a struggling economy. It also launched a large scale bond buying program to bring down longer-term fixed rates, officially putting Australia on the quantitative easing path.To date, the RBA has purchased $52 billion worth of government bonds. It has not made any purchases in support of the 3-year yield target since early December.Lowe once again said the cash rate won’t increase for at least another three years, but the quicker than expected recovery has many analysts betting the Board will soon change its tune.While the unemployment rate remains elevated at 6.6 per cent, the number of jobless Australians continues to tick down. At last reading, employment rose by 50,000 people in December 2020 according to the ABS.The Board’s central scenario sees unemployment remaining at around 6 per cent at the end of the year and 5½ per cent at the end of 2022.

The Reserve Bank has opted to keep official interest rates unchanged at its latest policy meeting this afternoon. The cash rate currently sits at a record low 0.1%, where it has remained since early November."In Australia, the economic recovery is under way and recent data have generally been better than expected. This is good news, but the recovery is still expected to be uneven and drawn out and it remains dependent on significant policy support," said RBA Governor Philip Lowe in his post-meeting statement."In the RBA's central scenario, it will not be until the end of 2021 that the level of GDP reaches the level attained at the end of 2019. In the central scenario, GDP is expected to grow by around 5 per cent next year and 4 per cent over 2022."The central bank announced a number of changes to key policy rates last month, including a 15 basis point reduction to the cash rate, three-year bond yield target, and term funding facility rate.It also launched a quantitative easing program aimed at purchasing $100 billion worth of bonds with maturities of around five to ten years over a period of six months.So far, the RBA has bought $19 billion worth of government bonds and a further $5 billion of Australian government securities in support of the 3-year yield target. Its balance sheet has increased by around $130 billion this year.Lowe said the November package had already delivered substantial aid to the economy, and is helping to lower financing costs for borrowers and keep the exchange rate low. He also cautioned the government against withdrawing its fiscal stimulus, saying that while the economic outlook has picked up on news of a coronavirus vaccine, ongoing support will be necessary until it is widely available.