On Monday, the head of Australia’s central bank apologized to people who took out mortgages last year because he said interest rates probably wouldn’t go up until 2024. Instead, rates started going up in May.
Reserve Bank of Australia (RBA) Governor Philip Lowe told lawmakers that the guidance for rates to stay at an all-time low of 0.1% was based on the economy growing as expected and inflation staying low.
Instead, the economy bounced back from the pandemic lockdowns much faster than expected. This, along with events around the world, pushed inflation to levels not seen in 32 years.
Related: Australia’s central bank raises interest rates for the third time in a row, with more to come.
The RBA started raising rates in May, and they are now at a nine-year high of 2.85%, which has gotten them a lot of criticism.
Lowe said that it was clear that the public “didn’t get the caveats” in his advice and that the bank would not use such language in the future.
“I’m sorry if people heard what we said and did what we said based on what we said, and now they regret what they did.” “I’m sorry about that,” Lowe told the senators. “At the time, we thought it was the right thing to do, but now that I think about it, I think we would have used different words.”
Lowe said as recently as last November that rates probably wouldn’t go up until 2024 because the effects of lockouts were still being felt and wage and inflation pressures were low.
“I thought it was the right thing to do at the time,” Lowe said. “The economy got better much faster than anyone thought it would, so we had to raise interest rates more quickly. This has made it much harder for people who borrowed money in the last two years.
As a result of the rate hikes that have already happened, the average monthly payment on a floating-rate mortgage will go up by about $950. The markets expect another rate hike next week that will bring the rate to 3.1%.
At a separate news conference, Prime Minister Anthony Albanese was asked if Lowe should step down because people were having a hard time with the rising cost of living.
Related: Australia’s inflation reaches a 32-year high, and the rate alarm goes off.
Albanese said, “We have faith in Dr. Lowe and his job as head of the Reserve Bank.”
The current seven-year term for Lowe’s (NYSE: LOW) ends in September 2023.
