Reserve Bank of Australia (RBA) has left interest rates on hold once again at the record low rate of 0.1%.
The board of RBA decided to maintain the cash rate target at 10 basis points and the interest rate on Exchange Settlement balances at 0% at its meeting on Tuesday.
“Inflation has increased sharply in many parts of the world,” RBA Governor Philip Lowe said.
“Inflation had also picked up in Australia and a further increase was expected, but “growth in labour costs has been below rates that are likely to be consistent with inflation being sustainably at target,” he said.
“The board 9of RBA) has wanted to see actual evidence that inflation is sustainably within the 2 to 3 per cent target range before it increases interest rates.”
The last time the RBA lifted the official cash rate was in November 2010.
To recap, the key economic measures the RBA looked at when deciding the cash rate included wage growth, inflation rates, and employment levels.
Analysts said the move by RBA to leave interest rate untouched could be explained by the fact that there is strong wage data in the last results which also ties in with the federal election cycle. There are record low rates of employment currently and wage data is increasing over time. Wage growth is a good indicator of further inflation, however recent supply chain disruptions extend to wage data increasing and will put more pressure on inflation.”
Some analysts, however, said based on what global factors were at play and the consensus across the market, rate rises were expected during the second half of 2022.
Origin Finance director and mortgage broker Kris Menon said an interest rate rise was inevitable and Australians should be prepared.
“With the RBA deciding not to increase the interest rate this afternoon, the market is becoming more stagnant with less intensity. A correction with the official rates is going to happen despite this year being a federal election year,” Menon said.
Despite an inevitable interest rate rise, Menon said there would still be an influx of people wanting to continue shopping for their new home.
“The economy is still strong, so a small and steady interest rate increase for people wanting to buy a home will be ok and accepted by Australians.”
