Reserve Bank leaves interest rates on hold in an early Christmas present for borrowers – but here’s why Aussies with mortgages should be worried

Australian borrowers have been warned to expect another rate hike even though the Reserve Bank has this month left interest rates on hold. 

The cash rate is already at a 12-year high of 4.35 per cent after the RBA last month raised rates for the 13th time in 18 months. 

But October’s 4.9 per cent inflation rate was still well above the Reserve Bank’s two to three per cent target. 

That means there’s no guarantee the most severe monetary policy tightening since 1989 could get even worse, with RBA governor MIchele Bullock on Tuesday hinting at more pain to come.

‘Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks,’ she said.

Economists fear the RBA could raise rates again in February should December quarter inflation data, due out in late January, show continuing consumer price pressures. 

The Reserve Bank last month adjusted its forecasts to have inflation returning to three per cent in late 2025 instead of mid-2025 and this is continuing to worry the board.

‘Returning inflation to target within a reasonable timeframe remains the board’s priority,’ Ms Bullock said.

‘High inflation makes life difficult for everyone and damages the functioning of the economy. It erodes the value of savings, hurts household budgets, makes it harder for businesses to plan and invest, and worsens income inequality.’

The cash rate is already at a 12-year high of 4.35 per cent after the RBA last month raised rates for the 13th time in 18 months. Governor Michele Bullock hinted more pain was possible