RBA official cash rate on hold once again
The Reserve Bank’s 4.35% official cash rate remains untouched once again following today’s RBA board meeting in Sydney.
While there remains some hope of rate cuts over the coming six months, the RBA today explained that a pause is still the best approach as it continues to target the 2–3% range for inflation.
And in a blow for those hoping for rate cuts in 2025, the Central Bank added, ‘Our current forecasts do not see inflation returning sustainably to target until 2026.’
So, another monetary policy meeting, another hold at 4.35%, despite the US Federal Reserve dropping their official rate last week – with more rate cuts said to come – amid fears of a US recession.
This policy is backed up by RBA Governor Michele Bullock’s speech earlier this month, in which she suggested circumstances were such that a cut wasn’t expected in the ‘near term’.
Near term is subjective, of course. And right now, annual inflation is 3.8% so it’s still above target.
That all said, there is a growing expectation that we’ll see rates head down as inflation is expected to ease over the next couple of quarters.
In fact, the ASX’s RBA target rate tracker indicates financial markets had been anticipating four cuts to the official cash rate from February to August 2025, bringing rates down to 3.25%.
However, as we’ve seen, factors beyond Australia’s control – such as global events – can impact RBA monetary policy.
Ramping up the pressure are other major central banks. The US Fed, the Bank of England and Bank of Canada have all begun dropping their rates as Australia becomes an outlier in this global trend.
The next RBA update on monetary policy will be Melbourne Cup Day. We’d put our money on another freeze, but things can change fast.
‘The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range,’ added the RBA.
‘Data since then have reinforced the need to remain vigilant to upside risks to inflation and the Board is not ruling anything in or out.’
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