US Federal Reserve increases rates by 75 basis points in latest meeting - what does this mean for Australia?

Yesterday, in the most recent meeting of the US Federal Reserve, rates were increased by 75 basis points, the single biggest movement in US rates since 1994. Fuelled by the most recent reporting of inflation in the US reported at 8.5%, the Reserve made the decision to move rates aggressively to target and aim to lower inflation before it gets out of hand.

While US unemployment remains steady at 3.5% and real business investment remains strong, along with US household credit being much safer and diligent than the pre-GFC era, with many more checks and safety nets in place for borrowing and lending decisions, the market is still weary of inflation growing out of control in line with wage growth of individuals and sky rocking business costs, which can also be tackled with monetary policy tightening.

Australian and US shares have been trending downwards, and saw further falls on the news. Australia's leading economists now pricing in a rate movement of 0.50% for the July RBA meeting, following increases of 0.25% and 0.50% in May and June respectively, but still well below the 1.50% RBA rate in April 2019.

What does this mean for Australians?

• Build buffers into your budgets

• Aim to pay more than the minimum on your loan repayments

• Use offsets and redraw with savings held (please as always get financial advice tailored to your situation prior to implementing anything)

• Pick up your phone and get your rate and home loan structure reviewed.

We would love to help - at Crown Property Finance, you are our number one priority and we will review your financial situation to help tailor it to your needs.