RBA makes April cash rate call

PropTrack economist Paul Ryan commented that today’s rate call indicated the bank was still being patient in assessing the persistence of inflation and is likely hoping to wait for data releases on both inflation and wages growth later in the year before making any changes.

But he noted that shifting circumstances could push the RBA to act sooner rather than later.

“The RBA cannot look through temporary inflation forever, so there remains the possibility that strong supply-shock driven inflation will force the RBAs hand. The RBA will be keenly watching that inflation expectations across the economy are not being driven higher by increases in the cost-of-living,” Mr Ryan said.

He observed that property buyers had already started to anticipate interest rate hikes.

“Higher inflation increases the likelihood of higher interest rates later in the year. This will weigh on housing price growth, which has clearly slowed in anticipation of these higher borrowing costs. The outlook for housing prices later in the year is one of a balance between higher mortgage rates and the higher income growth the RBA is looking to see before raising rates,” he added.

Anneke Thompson, chief economist at CreditorWatch, agreed that “an interest rate rise appears imminent” while noting that the RBA was expected to take a careful approach to any changes.

“While inflation is a key target for the RBA, full employment is another. Having just reached full, or close to full employment, it’s highly unlikely the RBA will choose to threaten this status by raising the cash rate too quickly. A steady approach is a more likely scenario, with small rises spaced out as the RBA monitors the impact of each rate rise as they occur,” she said.

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