RBA holds cash rate steady at 0.10% in April

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on April 06, 2021
RBA holds cash rate steady at 0.10% in April

At its post-Easter meeting today the Reserve Bank held the cash rate steady at 0.10%.

This marks the fourth consecutive meeting the RBA has decided to hold the rate at 0.10%, after making a 'Melbourne Cup cut' in November last year.

RBA Governor Dr Philip Lowe said while there are improvements in the economy, certain key indicators lag behind.

"The rollout of vaccines is supporting the recovery of the global economy, although the recovery is uneven. While there are still considerable uncertainties regarding the outlook, the central case has improved," he said.

"Inflation remains low and below central bank targets.... wage and price pressures are subdued and are expected to remain so for some years. The economy is operating with considerable spare capacity and unemployment is still too high.

"It will take some time to reduce this spare capacity and for the labour market to be tight enough to generate wage increases that are consistent with achieving the inflation target."

Dr Lowe maintains that wage growth and inflation consistently in the 2-3% range are necessary before the cash rate rises; the RBA Board does not expect these conditions to be met until 2024 "at the earliest".

The Governor also said that "the Bank will be monitoring trends in housing borrowing carefully and it is important lending standards are maintained".

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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 27, 2022. View disclaimer.

Westpac's head of rate strategy Damien McColough said it was more of the same from the RBA.

"There are ongoing signs that the market has re-calibrated its inflation expectations sufficiently for now and so other more supportive influences, such as the ongoing QE [quantitative easing] program can gain more traction," he said.

Mortgage Choice CEO Susan Mitchell said the hold was "unsurprising", but that lenders are also starting to move independently of Reserve Bank movements.

"Interest rates remain at record lows, both for variable rate and fixed interest rates, however we are starting to see some lenders raise interest rates particularly on 4-year and 5-year fixed home loans," she said.

"With the RBA’s term funding facility set to end in June, further upward pressure on fixed interest rates may continue later this year."


Photo by Pat Whelen on Unsplash

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison strives to deliver and edit news and guides that are engaging, thought-provoking, and simple to read.

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