How much will the RBA lift the cash rate in July?

author-avatar By
on July 01, 2022 Fact Checked
How much will the RBA lift the cash rate in July?

The Reserve Bank will meet next week to determine the cash rate for July with all signs pointing to another 50 basis point increase.

UPDATE: The RBA has announced a 50 basis point increase to the cash rate in July. 

In a speech last week, Reserve Bank Governor Dr Philip Lowe detailed there is no pre-set path that determines interest rate increases, however Aussies should be preparing for more to come. 

"The level of interest rates is still very low for an economy with low unemployment and that is experiencing high inflation," Dr Lowe said.

"As we make that assessment each month, the Board will be paying close attention to developments in the global economy, the evolution of labour costs and how household spending is responding to higher interest rates.

"I expect that next month we’ll be having the same discussion at our board meeting: 25 or 50 [basis point increase]."

ANZ Head of Australian Economics David Plank said the lags between policy and the economy means that the May labour market data were a reflection of policy settings prior to the first rate hike.

"The RBA won’t know for some time how the moves since then are impacting the economy," Mr Plank said. 

Economists forecast 50 basis point increase

Mr Plank believes the RBA is conscious that it has communicated quite poorly at times, however has aimed to clear that up recently. 

"While Lowe did not explicitly rule out going by more than 50 basis points in July and did say 'other things can happen', he did come back to saying that 25 or 50 was the likely choice," he said. 

"So, we see the RBA tightening by 50 basis points at its meeting on 5 July taking the cash rate target to 1.35%."

Westpac Chief Economist Bill Evans echoes this sentiment noting that a 50 basis point increase in the cash rate at the July 5 Board meeting seems highly likely.

"Now that the Board has clarified its position on the best approach to policy, it would seem quite clear that with the cash rate at only 0.85% a second decisive move of 50 basis points is the appropriate policy," Mr Evans said. 

"The decision in June to move by 50 points indicates that while rates are stimulatory with rising inflation pressures and a 48 year low in the unemployment rate, the better policy is to move decisively and signalling clearly that the Board is fully committed to returning inflation to its target range in due course.

"We expect the Board will decide to lift the cash rate by 50 basis points from 0.85% to 1.35%."

AMP Chief Economist Shane Oliver notes having the lowest unemployment rate in 48 years is good news – but the comparison to 1974 is not necessarily good given the stagflation that followed.

"The 1970s experience does highlight the need for the RBA to act quickly to make sure inflation expectations do not rise significantly because if they do it will be much harder to get inflation back down," Mr Oliver said.

"And it now appears that they are well aware of that lesson."


Advertisement

Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender

Variable
More details
  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws

Variable Home Loan (LVR < 70%)

  • Min 30% deposit
  • No monthly or ongoing fees, add 0.10% for offset
  • Unlimited redraws
Variable
More details
REFINANCE ONLY
  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
REFINANCE ONLY

Variable Rate Home Loan – Refinance Only

  • A low-rate variable home loan from a 100% online lender. Backed by the Commonwealth Bank.
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
NO ONGOING FEES
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
NO ONGOING FEES

Yard PAYG Home Loan (Principal and Interest) LVR ≤ 80%

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster

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 August 11, 2022. View disclaimer.


Image by Francis Seura via Pexels



Latest Articles

author-avatar
Jacob Cocciolone joined the Savings team in 2021 as a Finance Journalist. Driven by a passion for keeping Australians up to date with the latest financial news and trends, his areas of interest include financial technology, investing, property and motoring.

Be Savings smart.
Subscribe for free money newsletters.

By subscribing you agree
to the Savings Privacy Policy