RIP My Bank Account: Will the Interest Rate Go Up 10 Times in a Row?

Are you joking, ten times? Will the Reserve Bank of Australia (RBA) really raise the interest rate ten times in a row? Whelp, they’ve already made the interest rate rise and the cash rate rise nine successive times. So, why not ten?

Back on February 7, the RBA raised both the interest rate and cash rate by another 25 basis points in its ongoing battle against inflation.

At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 3.35%, the Governor of the RBA, Philip Lowe. It also increased the interest rate on Exchange Settlement balances by 25 basis points to 3.25%.

Unfortunately, this interest rate rise was somewhat predictable. Australians spent a lot over the Christmas period, which inflated the demand and therefore prices of some goods. What’s more, electricity prices, gas prices, and rental prices were also inflating independently of this season. If such inflation gets too buckwild, then these products would become inaccessible and we’d enter a recession.

By hitting money borrowers with another 25-point interest rate rise, the RBA hoped that the demand for some stuff, and therefore the price of some stuff, would gently relax over time. 

But as of March, the cost of living crisis is still happening and the price of some important items is still too high. This has led a tonne of experts to believe that another interest rate rise is in store. 

The financial comparison site Finder asked 42 different financial experts and economists if they believe we’re in for another hike, and 39 believed that we are. 

As Mala Raghavan, a financial expert from the University of Tasmania, said, “Considering that inflation is stubbornly high, the RBA is expected to tighten the monetary policy in March, and these tightening measures could continue till May”.

“Though inflation pressures are easing in retail, recreation and hospitality industries, other sectors like constructions, housing, rentals, fuel and transport costs, and food and non-alcoholic beverages, the inflation pressure is expected to persist.”

So, with this in mind, what would another rate increase mean for us Aussies? Well, if you have a variable mortgage, this change is probs going to hurt.

“The rate increases so far have already added around $12,000 per year to the average 30-year mortgage,” said Graham Cooke, Finder’s Head of Consumer Research. 

“Finder’s Consumer Sentiment Tracker shows that 52% of Australians are feeling financial stress due to the increased costs, with younger Australians experiencing the highest amount of worry.”

Related: What Does the Reserve Bank of Australia Do, and Should It Get in the Bin?

Related: More People Than Ever Reckon They’ll Never Own a Home, But Are They Right?

Read more stories from The Latch and subscribe to our email newsletter.