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RBA set to slow down on interest rate hikes

A composite image of the RBA governor Philip Lowe and Australian currency.
The RBA has signalled interest rate hikes may slow down. (Source: AAP/Getty)

Australia’s cash rate hikes could halve from next month, with the Reserve Bank of Australia (RBA) governor hinting the board could soon take its foot off the accelerator.

Philip Lowe said the case for a “slower pace of increase in interest rates” had become stronger.

On the back of his speech, ANZ and Commonwealth Bank (CBA) updated their forecasts.

However, ANZ is still predicting another double hike next month, with standard 0.25-percentage-point hikes thereafter.

The other three banks expect a 0.25-percentage-point hike next month.

What are the Big Four banks predicting?

Big Four bank’s cash rate forecasts:

  • CBA: Cash rate to rise by 0.25 per cent to 2.60 per cent in October, peaking at 2.85 per cent in November this year.

  • Westpac: Cash rate to rise by 0.25 per cent to 2.60 per cent in October, peaking at 3.35 per cent in February 2023.

  • NAB: cash rate to rise by 0.25 per cent to 2.60 per cent in October and peak at 2.85 per cent by November.

  • ANZ: cash rate to rise by 0.50 per cent in October to 2.85 per cent and hike by 0.25 per cent in November and December, which will be the peak at 3.35 per cent.

Analysis from found if the cash rate hit 3.35 per cent by the end of this year, as forecast by ANZ, someone with $500,000 owing at the start of the hikes could see their monthly repayments rise by $909 in total.

For someone with a $1 million mortgage, repayments could rise by a total of $1,818.

RateCity research director Sally Tindall said that while we may be done with double rate hikes, the trajectory for the cash rate was still up.

“While we’re likely to be well over the halfway mark, there could still be another one percentage point of hikes to come, in order to get inflation back under control. Potentially even more,” Tindall said.

Lowe has been clear that the central bank is willing to do “whatever it takes” to get inflation under control.

“The remainder of the year is going to be incredibly tough for many families with a mortgage, as both inflation and interest rates ramp up in the lead-up to Christmas,” Tindall said.

“Sit down and work out what your monthly repayments will look like if the cash rate hits 3.35 per cent. If that figure doesn’t fit with your current budget, make changes now, while there’s time.

“Refinance your mortgage to a lower interest rate, switch to a lower-cost energy plan and put some of your ongoing subscriptions on pause.”

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