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RBA: Interest rate rises to slow – but there’s still more to come

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As the RBA continues to battle inflation, governor Philip Lowe expects more interest rate rises are to come.

Home loan borrowers will likely continue to see higher interest rates over the following months, but rate hike announcements will likely be at a slower pace than seen so far.

The Reserve Bank of Australia (RBA) has increased the cash rate for the past 5 consecutive months. For the last 4 of those months they were increases of a relatively large 50 basis points.

Speaking 2 days after the latest announcement (Thursday 8 September), RBA governor Philip Lowe explained the central bank's motivation behind the increases and how it plans to act moving forward.

Inflation damaging the standard of living

Labelling high inflation a "scourge", Lowe maintained the RBA's stance of reducing inflation to between 2% and 3%.

"It damages our standard of living, creates additional uncertainty for households and businesses, erodes the value of people's savings and adds to inequality," Lowe said.

This year's rising interest rates have been to reduce the level of inflation, which most recently hit the 6.1% rate.

"This increase in interest rates – from what was a historically low level – is to ensure that the current period of high inflation is only temporary and that a more sustainable balance between demand and supply is established," Lowe said.

The case for a slower pace

Although Lowe said the RBA was "not on a pre-set path", he added that it expected there would be further increases in interest rates over the months ahead – but hopefully not as intense as we've seen over recent months.

"We are conscious that there are lags in the operation of monetary policy and that interest rates have increased very quickly," Lowe said.

"And we recognise that, all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises.

"But how high interest rates need to go and how quickly we get there will be guided by the incoming data and the evolving outlook for inflation and the labour market."

Despite national calls for higher wage growth, Lowe urged caution explaining that higher wages could in turn cause even higher inflation – meaning a further need for higher interest rates and higher wages.

Are you concerned about rising home loan rates?

As lenders increase their home loan rates in line with the RBA cash rate decision, mortgage repayments are getting higher. Compare your current rate with other offers on the market to make sure you're getting the best deal.

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