Borrowers narrowly escaped a bigger rate hike in May and may not be so lucky next month

Minutes from the last Reserve Bank meeting show that borrowers may have narrowly escaped a larger rate hike and should be bracing for the possibility of a big move in June.

Most economists expected the RBA to hike rates by 15 basis points at its May meeting, while a few announced a 40 basis point rate hike and a couple expected which she waits until June for her first move.

However, the Reserve Bank caught everyone off guard by raising rates by 25 basis points.

It seems that no movement or a 15 basis point hike was barely on the agenda for the May 3 meeting.

“Members considered three options for the magnitude of the rate increase at this meeting: increase the cash rate by 15 basis points, 25 basis points or 40 basis points,” the minutes read. .

Reserve Bank Governor Philip Lowe said more rate hikes would be on the way.(ABC News: John Gunn)

“Members agreed that raising the cash rate by 15 basis points was not the preferred option given that the policy was very stimulative and it was highly likely that further rate hikes would be required.

“A 15 basis point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.r

“However, members agreed that the preferred option was 25 basis points. A move of this magnitude would help signal that the board is now returning to normal operating procedures following the extraordinary period of the pandemic.”

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