The Reserve Bank raised the cash rate to 2.6 per cent -- a result predicted by only a quarter of economists surveyed, including Commonwealth Bank of Australia and AMP Capital Markets. Governor Philip Lowe reinforced a commitment to tightening even as he acted on signals that he would do so at a slower pace.
Australian policymakers are mindful that their household sector is among the world’s most-indebted and that the prevalence of variable rates on mortgages means hikes are particularly potent. The RBA is already in the midst of its sharpest policy tightening in a generation as it joins global counterparts in trying to rein in spiraling inflation.
“The board expects to increase interest rates further over the period ahead,” Lowe said today. “It is closely monitoring the global economy, household spending and wage and price-setting behavior.” Diana Mousina, a senior economist at AMP, highlighted that close to 60 per cent of mortgages are on variable rates, while even those fixed are typically on terms of 2-3 years, versus 30 years in the US.
8f the hike is anything less than 75bps, Canadian Dollar will fall to below levels: 50bps: US $0.70 25bps: US $0.65 0bps: US $0.60
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