RBA Raises Cash Rate to 2.85% for November 2022

The Reserve Bank has announced its latest decision on interest rates after receiving conflicting predictions from economists and commentators.

The RBA has chosen to raise the cash rate target by 25 basis points this month, bringing it up to 2.85 per cent.

The move increases the cash rate to 2.85 percent from 0.1 per cent in May, the most rapid tightening cycle in recent history.

“As is the case in most countries, inflation in Australia is too high,” Governor Philip Lowe said. “Over the year to September the CPI inflation was 7.3 per cent, the highest it has been in more than three decades.” 

“A further increase in inflation is expected over the months ahead, with inflation now forecast to peak at around 8 per cent later this year.” He then added, “Inflation is then expected to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand.”  

Finder’s survey of economists and commentators showed that around 59% of respondents thought that rates would remain on hold. AMP Capital chief economist Shane Oliver was amongst those who predicted that rates would stay the same, citing falling freight rates, delivery lags and input cost indicators as evidence of easing supply constraints.

Mr Oliver pointed out that interest rate hikes and falling commodity prices had caused a slowdown in demand, and he believes this will lower inflation from now until 2023. CPA Australia business investment policy manager Gavan Ord said that, on the contrary, the Reserve Bank’s rate rise today was to be expected.

Mr Ord said, “Inflation is still running hot and we expect further rises in the coming months.” 

“Businesses must ensure they continue to factor in future rate rises and their impact on trading conditions. Consumer confidence is already low,” he added.

Mr Ord explained that increased interest rates usually cause bigger loan repayments for those with mortgages and businesses with 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.”

These recent changes might have given you more questions in mind. If you have further questions, or if you need advice from Tax Experts in Australia, send us a message now. Our Financial Advisors are equipped with the knowledge and skills to help you with your financial journey as a Doctor or Medical Professional.

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