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RESERVE BANK GOVERNOR WARNS
Prepare for interest rate hike
25 June 2022
The Reserve Bank governor has warned Australians they need to be
prepared for substantial interest rate rises over the rest of this year,
conceding he is not sure how high they might go.
In an interview on ABC’s 7.30, his first public remarks since hiking rates
by half a per cent, Philip Lowe (pictured right) said he expected inflation
could hit 7 per cent by Christmas and predicted it would not fall until the
first quarter of next year.
At a time when Australians are already grappling with rising fuel, power
and grocery prices, he declared the RBA would do “what’s necessary” to
get inflation back to between 2 to 3 per cent.
“It’s unclear at the moment how far interest rates will need to go up to
get that,” Dr Lowe said.
“I’m confident that inflation will come down over time but we’ll have to
have higher interest rates to get that outcome.”
Dr Lowe added that it was “reasonable” to think interest rates would
reach about 2.5 per cent at some point, stressing they had been at
emergency levels in response to the COVID-19 pandemic and needed to
gradually return to normal.
Under such a scenario, a family with a $500,000 mortgage would likely
have to pay more than $500 a month more than they were a few weeks
The RBA governor conceded some families were already struggling to
make ends meet and would find the increase in repayments tough.
A drop in house prices will hit soon, however, Dr Lowe said “we’re not
worried that declines in housing prices will affect the banking system.”
With an interest rate hike looming in the lead up to Christmas 2022,
economy experts are advising the Australian public to be careful how
they spend and especially how they borrow.
Adelaide, South Australia