The RBA has decided to increase the cash rate target by 25 basis points this month, up to 2.85 per cent.
There was a mix of predictions from economists and commentators on what the RBA’s decision today would be, with around 59 per cent of the economists and commentators on comparison site Finder predicting rates would remain on hold.
AMP Capital chief economist Shane Oliver predicated that rates would remain on hold before the announcement due to supply constraints easing in terms of falling freight rates, falling delivery lags and falling input cost indicators.
Mr Oliver also noted that demand had been slowing on the back of interest rate hikes and falling commodity prices, which he expects will drive a decline in inflation through 2023.
CPA Australia business investment policy manager Gavan Ord on the other hand said the Reserve Bank’s rate rise today was to be expected.
“Inflation is still running hot and we expect further rises in the coming months,” said Mr Ord.
“Businesses must ensure they continue to factor in future rate rises and their impact on trading conditions. Consumer confidence is already low.”
Mr Ord said that higher interest rates typically result in higher loan repayments for mortgage holders and businesses on variable rates.
“We’re also seeing property prices slipping. Higher rates and falling home values will further dampen peoples’ willingness to spend at this critical time of year,” said Mr Ord.
“If consumers expect rates to rise further, we will likely see more hesitancy at the checkout this Christmas. Shoppers could shift away from top-end treats to budget-friendly alternatives. Some households may reduce their splurge. Businesses should prepare for customers changing what they spend on and where during the biggest holiday of the year.”
