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Reserve Bank of Australia

RBA Raises Cash & Settlement Rates by 25bps to 2.60% & 2.50%

October 18,2022

The RBA Board of Directors voted to raise the cash rate target by 25bp, to 2.60 percent. The interest rate on Exchange Settlement balances was also raised by 25bp to 2.50 percent.

The Board of Directors has raised interest rates on both deposits and exchange settlement balances by 25bp, to 2.60% and 2.50% respectively.

The RBA Meeting Minutes At A Glance;

The inflation rate is still rather high.

The price of coal and gas both dropped significantly due to the newly imposed tax on non-gas energy sources. This includes energies such as solar power or wind that are not used by homes directly but rather provide heating for them through heat pumps which emit no harmful greenhouse gasses while also being much cheaper than traditional fossil fuels like oil rig flames!

Chinese Economy

Members observed that the Chinese economy continues to struggle with significant headwinds, such as a weak real estate market and periodic bouts of COVID-19 cases.

Members also noted that the Chinese government continued to implement restrictions on public transportation.

The members saw that the total amount spent by households had grown significantly during the third quarter. 

Monetary Policy

The labor market continued to be quite competitive, with members noting that turbulence had been present in the financial markets. Central banks throughout each realm have maintained a fast and coordinated tightening of monetary policy over the previous month; this is evidenced by an increase in long-term government bonds yields. 

Further, conditions for obtaining credit within private enterprise continue becoming stringent.

The US Dollar Impact

The value of the US dollar has been on an upward trajectory for much of this year, increasing relative to most other currencies. The Japanese yen and British pound are among those that have seen their values decline significantly compared with America’s currency over recent months.

In September, the USA consumer prices for a wide range of goods and services increased more than anticipated as inflationary pressures continued to drag on the American economy. 

The Chinese government has taken several steps to stimulate their real estate market in recent years. For example, they increased the amount of money that banks could lend on property loans and relaxed credit requirements for those looking to get into buying homes or investing more aggressively into this sector of finance as well by making it easier than ever before with lower down payment requirements.

This is all happening at a time where financial conditions are becoming less stringent across most parts of international capital markets which will only encourage investment even further.

Mortgage Market

The monthly mortgage payments that you make are expected to increase by a substantial amount in the time ahead due, at least partly, because of recent hikes in interest rates on loans.

The RBA has been steadily raising interest rates over the course of this year in order to combat further inflation. After much consideration, they finally made their move and raised them another 25 basis points on October 18, 2022 which will impact mortgages heavily as well as home values nationwide.

It’s still too early for consumers’ reactions but one thing is certain: these changes cannot come soon enough.

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Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.

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