Mortgagees hoping for relief on repayments should not expect an interest rate cut anytime soon, RBA Governor Michele Bullock has warned in an address to parliament.
Stressing that any forecast was only based on current data available to the RBA board, Bullock said the rates would stay unchanged in the short term.
“Based on what the Board knows at present, it does not expect that it will be in a position to cut rates in the near term,” Bullock said.
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Bullock said that while financial markets had priced in a rate cut by the year’s end, the RBA board considered this to be “premature thinking”.
“I understand that this is not what many households want to hear,” she said.
She acknowledged that mortgage holders and businesses have been feeling the squeeze from increased interest rates over recent years.
“But the alternative of higher inflation for longer is much worse,” she said.
“Inflation has not been this high for a few decades and I think many people have forgotten how bad it is – some younger people will not have experienced high inflation at all.
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“There is a reason why there is so much talk about the cost of living – high inflation hurts everyone.
“It reduces what people can buy with their wages, erodes the value of savings, and it disproportionately hurts those on low or fixed incomes.”
She said it was imperative that the board “does what is needs to do” to ensure inflation falls.
The central bank has kept the interest rate on hold at 4.35 per cent for six consecutive months.
In her speech today, Bullock reiterated that the economic outlook remains highly uncertain.
“Central forecasts are for inflation to return to the target range late in 2025,” she said.
She said that even though growth in the economy had been weak, there was still a higher demand for goods and services than what the Australian economy could produce.
”These are our central forecasts and there is substantial uncertainty around them, more so the further out the forecasts are.”
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