Leading Indicator Predicts RBA Rate Hike Run is Over

Homeowners may finally catch a break as a leading market indicator predicts no changes in the Reserve Bank of Australia’s interest rates for the upcoming month. For the first time in a year, the RBA Rate Indicator has hit 100% “no change,” a relief for households with ten consecutive rate hikes.

The ASX RBA Rate Tracker and Fixed Rate Expiries

The ASX 30-Day Interbank Cash Rate Futures April 2023 contract is currently trading at 96.440, indicating an expectation of 0% interest-rate hikes to 3.85% for the upcoming RBA Board meeting. This is welcome news as experts have warned that 880,000 Australian households, whose fixed rates have expired, may face challenges in weathering continued hikes. Moody’s Analytics economist Harry Murphy Cruise predicts that one more hike may be left in the RBA’s arsenal to tackle inflation. “There’s more to come. We expect interest rates to peak at 3.85% in April, lifting the average rate on new variable home loans to 6.5%. It was just 2.5% at the start of 2022.”

Consumer Spending and Business Credits in February

The latest NAB Monthly Data Insights reveals flat consumer spending and business credits in February, with significant falls in essential services, vehicles, and fuel. NAB chief economist Alan Oster said, “consumption has held up but is unlikely to be able to sustain its strong recent growth rates.” Though inflation is expected to peak in Q4, price rises may still contribute to nominal spending growth, resulting in a soft outcome for real consumption.

Related Facts

• The Reserve Bank’s inflation target is between 2% and 3%.
• The RBA’s cash rate target was lowered to 0.1% in November 2020.
• The cash rate remained at 1.5% for over two years before being lowered to 1.25% in 2019.

Key Takeaway

With the ASX’s RBA Rate Indicator predicting a halt in interest rate hikes for the upcoming month, homeowners may finally see some relief. However, experts warn that households with fixed rate expiries may still face challenges in weathering continued hikes, and inflation will likely continue to impact consumer spending.

Conclusion

For homeowners who have faced the brunt of ten consecutive interest rate hikes, ASX’s prediction of a halt in rate hikes may provide some much-needed relief. However, with fixed rate expiries and continued inflation, the road ahead may still be challenging.