RBA gives us another Lowe blow, share markets did not expect it
Despite the repeated "Lowe blows" over the past year, it's fair to say we weren't expecting yet another one yesterday. And yet, that's exactly what we got, with RBA Governor Phillip Lowe announcing the bank had decided to raise interest rates by another 0.25%. This is needed, he says, to continue battling inflation, which despite easing isn't yet heading south fast enough for the Central Bank's liking.
Until the announcement at 2:30pm yesterday, the Australian share market had been flat on the expectation of a rate hold. But as soon as the announcement of another hike was made, the market plunged. The All Ordinaries fell more than 45 points in just over a minute, and ultimately closed down 64 points at 7459. And today there's been even more pain with the big banks taking the hit.
The increase in the cash rate – now at its highest level in 11 years – comes a year after the central bank started raising it from the historic low of 0.1%.
The rate hike will continue to put pressure on mortgage holders. Those with a $500,000 loan will pay an extra $78 in interest payments per month, it'll add $117 monthly to the outgoings of someone with a mortgage of $750,000, and push those with $1 million owing to the bank up an extra $156 a month.
Probably most stark though is that in the year since the rate hiking cycle started, those mortgages have gone up by more than $1000, $1500, and $2000 respectively, which is why people are struggling.
In other news, there's no doubt that we're in interesting economic times, and over the past few weeks I've had some really interesting conversations on Money News that you might find interesting:
- Shane Oliver from AMP on the RBA's decision to hike rates yet again.
- Evan Lucas from Investsmart on the market plunge that followed the interest rates announcement.
Of course you can always tune in to Money News live 7pm Monday-Thursday on the Nine Radio network, or grab the podcast whenever suits you!