Reserve Bank of Australia governor Philip Lowe has warned borrowers to prepare for interest rates to rise for home loans in Sydney, but not before 2023 at the earliest.
Mr Lowe said the decision to discontinue the yield target reflected the improvement in the Australian economy and the earlier-than-expected progress towards the RBA’s inflation target.
“Given that other market interest rates have moved in response to the increased likelihood of higher inflation and lower unemployment, the effectiveness of the yield target in holding down the general structure of interest rates in Australia has diminished,” he said.
The decision to discontinue the yield target did not mean the cash rate will be increased before 2024, he added.
“Given the information we currently have to hand, it is still entirely possible that the cash rate will remain at its current level until 2024. But it is also possible that an earlier move will be appropriate.”
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