Millions of Australian families have been spared another mortgage bill squeeze in July after the RBA paused its record-breaking hike cycle.

But those hoping the move signals central bankers are finished with rate rises will be disappointed because it’s likely to be a temporary reprieve.

Not only has RBA governor Philip Lowe left the door open to resuming hikes in August, several major banks are still predicting at least two more rate rises from 4.1 per cent to 4.6 per cent in coming months.

BIS Oxford Economics head of macroeconomic forecasting Sean Langcake said the July pause is likely only deferred pain for home owners, with the RBA’s statement on Tuesday strongly alluding to further rate increases.

He said the July pause was driven by the “absence of a compelling indicator in the data” that would have sparked another rate increase.

But unless upcoming data shows inflation massively plummeted in the June quarter (which is unlikely) then further hikes remain on the cards.

“I see them hiking twice in the next two months,” Mr Langcake said.

EY chief economist Cherelle Murphy said July was a “hawkish pause”.

“The … decision to hold the cash rate today acknowledges the 12 rate hikes already in the system have yet to do their full work,” she said.

“Every rate hike becomes a tougher call as it takes a further bite out of the economy – which, if not exactly calibrated with the state of activity, will inflict too much damage.”

The July pause will spare millions of families another painful increase in their mortgage bills, but for many households the damage is done.

Average monthly mortgage bills have still risen about $1300 since May 2022, Finder figures released on Tuesday found.

That has led to a huge increase in mortgage stress, while many recent home buyers are being forced to spend greater portions of their incomes on repayments instead of other family budget priorities.

‘Time to assess’

RBA governor Philip Lowe said on Tuesday that the July pause would give central bankers time to assess incoming economic data before determining whether inflation is on track to return to target by mid-2025.

“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” Dr Lowe said in a statement published on Tuesday afternoon.

“In light of this and the uncertainty surrounding the economic outlook, the board decided to hold interest rates steady this month.

“This will provide some time to assess the impact of the increase in interest rates to date, and the economic outlook.”

The crucial data drop will come on July 26 when the Australian Bureau of Statistics (ABS) publishes inflation figures for the June quarter.

Mr Langcake said those figures will provide crucial insights into whether inflation for services is easing or has continued to accelerate in 2023.

“Services inflation is where we see labour costs flowing through to inflation,” he said.

More rate hikes to come

Commonwealth Bank senior economist Belinda Allen said the RBA left its forward guidance unchanged in July, again saying more rate hikes may be necessary to bring inflation back down to the 2 to 3 per cent target.

“At this stage our base case remains unchanged. We expect one final 25bp [basis point] rate hike in August to take the cash rate to 4.35 per cent,” she said.

ANZ Bank economist Adam Boyton said two more rate hikes are still on the horizon, with the cash rate slated to peak at 4.6 per cent this year.

“With the April pause followed by back‑to‑back rate hikes in May and June, we are reluctant to back away from our call of a 4.6 per cent peak just yet,” he said.

“When and whether we get to that level is a little more uncertain in the wake of today’s pause.”