The Reserve Bank of Australia boss Philip Lowe has warned that interest rates are likely to rise sooner again than markets are currently expecting, as inflationary pressures continue to build.
The comments come as the Reserve Bank lifted Australia’s cash rate by another 25 basis points to 2.85 percent on Tuesday.
“We will be paying close attention to developments in inflation over the summer months,” Dr Lowe said.
“If necessary, we are prepared to raise interest rates further to ensure that inflation remains consistent with the target.”
In a speech to business leaders in Hobart on Tuesday night, Dr Lowe appeared to hint that rates could start to rise sooner than expected, saying the bank would be “watching developments in the labour market closely”.
He also issued a grim warning about inflation, saying it was likely to remain below the RBA’s target of 2-3 per cent for the next few years.
“Even with a bit more help from fiscal and monetary policy, it is going to be some time before inflation is comfortably back in the 2-3 per cent range,” Dr Lowe said.
“It is possible that inflation will be lower than 2 per cent for three years in a row.”
According to RateCity, Mortgage holders who had a loan of $500,000 in May are now paying $760 more per month.
For a $750,000 loan, the monthly payment jumps to $1,140, and for a $1 million loan, it jumps to $1,520 per month.
As the Treasurer of Australia, Jim Chalmers has expressed his sympathy for those mortgage holders who are struggling to make their repayments. He has said the Government is aware of the difficulties that many families are facing and is working to find solutions.
The Treasurer acknowledged that the current economic conditions are tough for many families. However, he said the Government is working to create jobs and grow the economy so that families can get back on their feet. He urged Australians to remain positive and to support each other during this difficult time.
According to PropTrack, the average Sydney mortgage holder will see an increase of $115 per month as a result of the 25 basis point increase to the cash rate. After the rate hike, the average Melbourne resident can expect to pay an extra $96 per month on their mortgage, which is currently $644,000
