In May the Reserve Bank has kept interest rates on hold at 4.35 per cent. It means rates will remain at this level for another six weeks, until the RBA Board’s next meeting in mid-June.

In a statement announcing its decision, the RBA Board said while the economic outlook remained uncertain it will “remain vigilant to upside risks.”

“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out,” it said.

“The Board will rely upon the data and the evolving assessment of risks. In doing so, it will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.

“The Board remains resolute in its determination to return inflation to target,” it said.

RBA governor Michele Bullock said the Board discussed the possibility of raising rates in its meeting this week, and the fight against inflation wasn’t over.

“I think we’ve always felt that it was a bit too soon to declare victory,” she said in her post-meeting press conference. “And I think the numbers in recent weeks have demonstrated that for us.

“We don’t think we necessarily have to tighten again, but we can’t rule it out. If we must, we will,” she said.

Reserve Bank willing to lift rates

In recent weeks, some economists and market commentators had been pressuring the RBA Board to lift rates, arguing recent upside-surprises in inflation could keep inflation higher for longer.

But the RBA Board’s decision to keep rates steady follows last week’s news that retail spending fell by a surprisingly large amount in March.

The decline in retail spending in March was the weakest on record, outside of the pandemic period and introduction of the GST, and it prompted other economists to warn about the pressures millions of households were under.

“Australian households are struggling and retail conditions are dire,” Callam Pickering, APAC economist at global job site Indeed, warned last week.

“Further tightening in the current environment would leave the nation at clear risk of severe downturn or recession,” he said.

RBA does not want to tip economy into recession

On Tuesday, Governor Bullock said when the RBA lifted rates in November, from 4.1 to 4.35 per cent, it was “taking out a little insurance.”

And, she said, when economic data looked relatively soft in December and at the start of this year, it led many people to believe that the fight against inflation had been won — but that belief was premature.

However, she said the RBA Board was also conscious of the risks involved in lifting rates too high, because of the damage it could do.

“We don’t think we necessarily have to tighten again, but we can’t rule it out,” she said.

“Conditions are restrictive. We know that interest rates impact different sectors of the economy and different households [in different ways], and what we are really trying to do is slow things enough to bring inflation down without tipping the economy into recession.

“I hope that we don’t have to raise interest rates again, but having said that, if we think we have to, we will.”

Ms Bullock said petrol prices were high at the moment and they were going to have a big influence on the RBA’s inflation forecasts in coming months, just to complicate things.

“[They are] going to be a little bit elevated in the near term, in the next six months, and then [they are] going to come down,” she said.

“Inflation at the moment is still declining, but it’s declining less quickly than we thought it would.”

She said financial conditions were already restrictive for households, and small businesses were under pressure too, but big businesses were managing somewhat better.

What action can you take

Very simple. Take 5 minutes to phone a lending specialist. Having your home loan reviewed can help you ensure you’re not paying too much.

Some options we can help you explore include refinancing (which could mean increasing the length of your loan and decreasing monthly repayments), debt consolidation, or building up a cash buffer in an offset account.

If you’re keen to switch and save, get in touch with one of our local specialists today. Understanding your options can start with a simple phone, web, or in person discussion.

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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.