The Reserve Bank of Australia (RBA) has decided to leave the cash rate on hold at an 11-year high of 3.6%, marking the first pause since April 2022. This move follows ten consecutive monthly interest rate rises, which is the most severe pace of monetary policy tightening since the era of the RBA target cash rate began in 1990.
While inflation has moderated from last year's 32-year highs, it still remains above the targeted range of 2-3%. The Commonwealth Bank, Westpac and NAB are expecting another quarter-point rate rise in May that would take cash rates up to 3.85%.
However, many borrowers with a fixed-rate mortgage face severe increases as their ultra-low two per cent fixed-rate loan periods expire in coming months. They will be forced onto "revert" variable rates exceeding seven per cent.
The decision came after economists were divided about whether or not there would be another increase due to record run-ups ahead; however, this indicates that they will monitor its impact before lifting borrowing costs again. The board expects some further tightening may well be needed to ensure inflation returns to target levels.
Australia's labour market strength was pointed out by some economists as among reasons for more monetary policy tightening needed despite unemployment hovering near half-century lows at three and a half percent while job vacancies double long-run averages.
The RBA had been relatively late to lift its official interest rates but made its first move during May's federal elections last year.
Overall, while today's announcement comes as good news for many Australian borrowers who have seen their debt grow rapidly amidst higher lending costs over recent months; it also highlights how much work needs doing if policymakers hope for sustainable economic growth going forward with continued concerns around inflation pressures remaining present throughout markets globally right now too.