The much-anticipated first RBA board meeting for 2022 was held on Tuesday 1 February and as signalled previously, the Board showed patience in regard to the official cash rate. The meeting was highly anticipated as the Board had not met since early December 2020 to make a decision around interest rates and much has happened in the economy over the past few months.
There has been a growing call from financial analysts for the RBA to lift rates. While a rise at the February meeting was highly unlikely, all eyes were on the statement accompanying the meeting as an indication of the Board’s thinking as many seek a forecast to when a rate rise will occur.
The official cash rate has been at the historic 0.1% rate for over a year with our customers enjoying extremely low motor vehicle finance rates. Over the past year the RBA had stated it was not expecting the conditions to be in place to signal a rate rise until 2024. But it is now looking like that a rate rise will come sooner.
Governor of the RBA, Dr Philip Lowe, addressed the National Press Club on Wednesday 2 February which provided an opportunity to provide additional information on the RBA’s outlook for the Australian economy.
We cover the details from the RBA Statement on Monetary Policy for February to provide an update on the current interest rates situation and what may play out over 2022 so individuals and businesses can plan their vehicle purchases and car finance moves. The RBA’s changes to the official cash rate will flow through to interest rates across many lending sectors including motor vehicle finance.
RBA February 2022 Statement
At the February 2022 meeting, the RBA Board kept the official cash rate steady at 0.1% and ceased its bond buying program as of 10 February. In the statement which officially announces the decisions made at these Board meetings, the Board notes that while the Omicron outbreak had had an effect on the economy, the economic recovery had not been derailed.
As the COVID-19 case numbers continue to trend down, the Board expects spending to increase. The support for this expectation is the good position of both business and household balance sheets, the uptick in investment by businesses, the large quantity of work in the pipeline in the construction sector and the supportive settings of macroeconomic policy. However, the Board acknowledges that the pandemic remains a reason for uncertainty.
Unemployment has declined to 4.2% as of December figures, indicated a strong recovery in the labour market. While the number of worked hours are expected to show a drop in January figures due to the Omicron outbreak, the high job vacancy numbers suggest there could be additional improvements in employment in coming months.
The RBA has forecast that unemployment could fall below 4% later in 2022 and to around 3.75% by the end of next year. While growth in wages has shown a lift, it has only reached the relatively low levels which existed prior to the pandemic. As the labour market continues to tighten, a further gradual increase in wages growth could be expected.
The Board noted that inflation had increased more quickly than it had expected. Uncertainty remains around disruption to the supply chains and how that will impact prices.
The statement concludes with the Board committing to maintain the supportive monetary conditions in order to achieve the objective of full employment and an inflation rate which is consistent with its targets. The Board repeated its previous comments that it would not lift the official cash rate until such time as the actual rate of inflation is sustained in the 2-3% range.
It notes that while there had been a pick-up in inflation, it was too soon to conclude that this indicated a sustainable rate in the target zone. Also in line with previous statements, the Board concludes with the comment that it is prepared to be patient!
The day after the Board meeting, RBA Governor Philip Lowe made a keynote address at the National Press Club and reiterate the preparedness of the RBA Board to show patience in regard to interest rates. He said that the country was ‘within reach’ of the historic milestone of 3.75% unemployment by the end of 2022. That would be the lowest unemployment rate in 50 years.
The Prime Minister, Scott Morrison, also commented that the country has a ‘once in a lifetime opportunity’ to achieve a milestone unemployment rate.
Impact on Motor Vehicle Interest Rates
The general view from analysts is that the RBA will likely lift the official cash rate later this year, with August mentioned as a possible timeframe. A specific date has not been mentioned by the RBA as they show patience and focus on the inflation and unemployment figures not the calendar.
Our customers with current fixed car loan interest rates will not be impacted by any changes in interest rates during the term of their finance. Jade Car Loans is of course committed to maintaining our own policy of better interest rates across our motor vehicle business finance portfolio.
However, should the RBA lift the cash rate, our lenders will likely make adjustments to their rates which then flow through to what our customers can achieve. If considering a new vehicle purchase with finance, acting sooner rather than putting off the move could result in securing a loan at the current historic low rates.
To discuss cheap interest rate motor vehicle finance contact Jade Car Loans on 1300 000 003
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.