Indeed, the recent series of interest rate hikes by the RBA reflects the central bank's response to the increasing inflation pressures. These rate increases have a cascading effect on various lending markets, including truck loans. Lenders such as banks, finance companies, and non-bank institutions adjust their interest rates based on the central rate set by the RBA and other factors.
As the RBA continues to signal the potential for more rate rises in the future, businesses and individuals seeking new truck loans should be prepared for higher borrowing costs. It's crucial to be proactive in exploring your financing options and securing the best possible interest rates to minimize the impact on your financial plans. If you're considering a new truck purchase, consulting with finance experts can help you navigate the changing landscape and make informed decisions about your loan choices.
As mentioned in the May Board meeting statement, the RBA is now undertaking a process of normalising monetary policy settings that is, the cash rate or interest rates. The central bank had slashed interest rates significantly in 2020 as part of stimulus measures to support the economy as the COVID-19 took its toll. That level of support and those historic low rates are no longer seen as necessary and inflation has surged well beyond the bank’s target range stated as between 2% and 3%.
To explain its rationale behind the monthly interest rate decisions, the RBA Board issues a detailed statement under the signatory of the Bank’s Governor, Philip Lowe. This statement is essential reading for business operators seeking insights into where interest rates may go in the future as it also includes the RBA’s outlook and forecasts.
July 2022 Statement from Governor Lowe
The 5 July RBA Board meeting resulted in another 0.5% increase to the cash rate. This means the rate has risen from 0.1% to 1.35% in the past 3 months. The RBA Board notes a number of factors, both domestic and global, contributing to the rising inflation rate in Australia. Many of these factors are the same as those mentioned in the May and June statements.
In brief, the key points in the July statement are:-
- Inflation across the global is at very high levels, boosted by pandemic-related issues in global supply chains.
- The war in the Ukraine is again mentioned as a contributor to both international and Australian rates of inflation.
- Strong demand is placing pressures on the production capacity.
- Monetary settings and policies on a global basis are being amended to address the high rates of inflation.
- Changes in monetary policy will take time to have an impact on inflation.
- The Board considers that for most countries, it will be quite a period of time before the rate of inflation sees a return to the targets.
- Australia’s inflation rate, while very high, is not at the high levels seen across a number of other countries.
- While global issues are accounting for much of inflation increase in Australia, local factors are seen as also contributing to the surge.
- Domestic factors such as the strength in demand combined with the tightness in the labour market is constraining capacity of some businesses to reach suitable production capacity.
- This is creating upward price pressures.
- Floods across many areas are having a significant impact on the price of some goods.
- Inflation in Australia is expected to reach a peak in the latter part of 2022 before declining in 2023 to the target range of 2-3%.
- Moderation in the inflation rate is expected as the supply issues globally ease and the prices for some commodities stabilise.
The RBA sees higher rates of interest assisting to achieve a more sustainable demand-supply balance. The CPI figures for the June quarter when released later this month will provide the Board with further data to release a complete set of forecast updates in August.
A number of key points were reiterated from previous statements including the ongoing resilience of the economy and the tight labour market with the lowest unemployment rate in nearly 50 years at 3.9%. A further drop in unemployment is expected over the coming period.
As businesses continue to compete to fill job vacancies in the current labour market, growth in wages is expected. Uncertainty in the outlook for the economy exists in relation to household spending behaviour. While the data recently has been positive, rising prices and rates are putting pressure on the household budget.
In concluding the statement, the Board notes that close attention will be paid to the outlook globally including the continuing COVID-related uncertainties especially occurring in China. The July rate rise is yet another step in withdrawing the extraordinary support provided to assist in insuring the economy against what could have been the worst case scenario through the pandemic.
Additional steps are expected to be taken by the RBA Board in coming months. Incoming data will guide the actual size of future rises and when the increases will be made. The next rate decision is expected from the RBA following the Board’s 2 August meeting.
Truck Finance Impacts
Lenders have responded with increases in lending rates but we have remained solid in our commitment to achieving the cheapest truck loan rates, even in this rising market. Some analysts are expecting a 75 basis points increase in August while some say 25 basis points. Either way, with this passed onto customers, it will represent a significant increase in truck loan interest rates, repayments and the total interest payable.
Business owners are urged to bring forward purchases wherever possible to beat the upcoming rises and using our services to secure the cheapest rates.
Contact Jade Truck Loans on 1300 000 003 for cheap interest rate truck loans.
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