Saturday, 10 June, 2023

Australia pauses interest rate hikes

Australia pauses interest rate hikes

SYDNEY: Australia's central bank left interest rates on hold Tuesday, pausing a series of sharp hikes that have drawn criticism from homeowners.

The Reserve Bank of Australia held borrowing costs at 3.6 percent, ending a run of 10 successive rate hikes aimed at taming inflation, reports AFP.

Governor Philip Lowe said the pause would allow the bank to take stock of previous increases and a global outlook that remains "subdued".

"The recent banking system problems in the United States and Switzerland have resulted in volatility in financial markets and a reassessment of the outlook for global interest rates," Lowe said.

The news gave a boost to stocks, with the S&P/ASX 200 rising 0.2 percent in the afternoon.

The RBA has come under fire from homeowners who have seen average monthly mortgage repayments skyrocket.

Australians are forking out an extra Aus$250 (US$169) every week to meet the repayments on an average mortgage of about Aus$600,000 (US$407,000).

Household inflation in Australia currently sits around 6.8 percent -- down from 7.8 percent in December but still stubbornly above the central bank's target of between two and three percent.

Lowe said "some further tightening of monetary policy may well be needed to ensure that inflation returns to target".

Australia, like most countries fighting inflation, faces a delicate balancing act to bring prices down without stifling economic growth and sparking a recession.

"The path to achieving a soft landing remains a narrow one," said Lowe.

House prices have fallen in most of Australia's city centres since the Reserve Bank started lifting rates.

Market research firm Roy Morgan earlier this year estimated that one in five Australian households were facing "mortgage stress" and struggling to meet repayments.