Cautious RBA pauses September rate
Today, the RBA paused the official cash rate at 3.6% as Australia’s consumer spending picked up and headline inflation increased in August.
Following last month’s 0.25% drop in the Central Bank’s official cash rate, today’s hold shows a more prudent approach, as the Central Bank outlined today.
‘With signs that private demand is recovering, indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the Board decided that it was appropriate to maintain the cash rate at its current level,’ said the RBA today.
It’s worth noting that the RBA’s current rate of 3.60% is the lowest level since April 2023.
And so far this year, the RBA has delivered three rate cuts for home loan mortgage holders in this current easing cycle, providing relief for borrowers struggling with cost-of-living pressures.
That said, the August Consumer Price Index (CPI) rose to 3.0%, up from 2.8% in July, highlighting just how challenging inflation is to control. However, the annual trimmed mean dipped to 2.6% for the year to August, while inflation for the June quarter was 2.1% (both still within the target range).
Annual trimmed mean data – which strips out volatile items – is more valued by the RBA as an indicator. Even more valued by the Central Bank is quarterly data, which is out next month, in time to influence the RBA at their next meeting in early November.
With this in mind, many forecasters believe we could still see at least one more cut in 2025 – and maybe another in early 2026 before the rate settles at around 3.10%. Some are even asking if we need to cut rates at all right now.
Mixed signals for sure, though inflation is broadly in a good place.
What we do know is that while the global economic outlook remains volatile, the RBA will continue to move in a circumspect manner.
‘There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided,’ the RBA concluded.
If you would like to review your home loan arrangements, contact Mortgage Broker Group.
We can assist with tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household prices.
Mortgage Broker Group operates nationwide, and our service is 100% free to you (although your lender will likely apply their normal fees and charges to any loan you take out).