Mortgage relief for borrowers looks to still be a long way off, as RBA governor Michele Bullock doubles-down on warnings that it's too early to be thinking about cutting interest rates.
Appearing before a house economics committee today, Bullock pointed to underlying price pressures remaining stubbornly persistent as the reason for it being “premature to be thinking about rate cuts”.
That comes despite money markets being fully priced for a rate cut by year’s end.
Repeating guidance she had made at last week’s RBA board meeting, Bullock played down any rate reductions in the “near-term”. The central bank’s latest forecasts do not expect trimmed mean inflation – the RBA’s preferred measure of consumer price growth – to return to its 2 to 3% target band until the end of 2025.
Bullock said the full impact of the RBA’s aggressive run of rate hikes since May 2022 is still yet to be felt, and that “We don't know precisely how long some of these things take to work their way through. I think there's probably still a bit more to come, but I couldn't be precise on the amount.”
Typically, it takes interest rate adjustments about 12 to 18 months to flow through the economy and fully impact households and businesses.
She did note, however, that there are significant uncertainties regarding the RBA’s forecasts.
“Circumstances may change, of course, and the outlook remains uncertain, but based on what the board knows at present, it doesn't expect it will be in a position to cut rates in the near-term. I do understand that this is not what households want to hear [but] the alternative of higher inflation for longer is much worse,” she said.