Westpac has taken the lead in announcing an increase to its variable interest home loan rates, hiking them by 0.25 percent. This adjustment is set to be automatically implemented by February 17.
Shortly following Westpac’s announcement, the Commonwealth Bank of Australia revealed a similar move, raising its variable rates by 0.25 percent as well. These changes are scheduled to take effect on February 13.
These decisions come amidst challenging economic forecasts from the central bank, which suggest a prolonged period of high inflation. The central bank does not expect inflation to return to the 2 to 3 percent target range until June 2027. Furthermore, core inflation is not anticipated to hit the midpoint of that range until a year later.
Despite these grim projections, Governor Michele Bullock expressed uncertainty regarding the bank’s future actions, leaving borrowers and financial analysts alike speculating about what may come next.
The central bank’s updated economic forecasts didn’t bode well for borrowers, with inflation not predicted to come back into the 2 to 3 per cent target band until June 2027, and core inflation not tipped to reach the middle of that range for a further year.
But Governor Michele Bullock seemed genuinely unsure about what her bank’s next move will be.
“It is not the same as the tightening cycle when we were coming out of COVID, when we were coming from 0.1 per cent cash rate; it was quite clear that we had to go up and we had to go up quickly,” she said.
“This isn’t as clear.”
CBA’s economists expect another hike in May, taking the cash rate to 4.1 per cent, because there’s unlikely to be enough evidence by then to show today’s hike is slowing demand.
“Inflation is simply too high for the RBA at this stage, and the central bank has signalled a stronger resolve to bring it back within target,” Commonwealth Bank head of Australian economics Belinda Allen said.
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