Rates stay on hold to kick-off the new year
Today’s first monetary policy meeting of 2024 opted for an official cash rate pause, with the RBA holding the rate at 4.35%.
Last week’s inflation figures were clearly pivotal in today’s announcement, which makes it two pauses in a row following December 2023’s decision.
This trend appears to herald a new era in the war on inflation, with most experts, banks and lenders tipping at least one official rate cut this year.
However, the RBA didn’t rule out an increase to rates in the future.
‘While recent data indicate that inflation is easing, it remains high. The Board expects that it will be some time yet before inflation is sustainably in the target range,” explained the Central Bank.
Though the RBA, as expected, offered a cautious note today, saying that while there are encouraging signs, ‘the economic outlook is uncertain and the Board remains highly attentive to inflation risks.
‘The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.’
While the RBA is covering itself with that statement, clearly inflation is showing signs of moderation.
In fact, inflation expectations are down to their lowest four-week average since February 2022, according to ANZ economists.
Looking at the broader data, the CPI experienced a modest 0.6% increase in the last quarter of 2023, marking the lowest quarterly inflation uptick since March 2021.
This shift brought the annual inflation rate down from 5.4% to 4.1%, a level not seen since the December quarter of 2021. For perspective, barely 14 months ago, inflation hit 7.8%.
Considering this current trend, the consensus among major banks and experts is leaning towards 2024 as the year for a potential interest rate cut.
However, the timing remains uncertain, as is typical in the unpredictable world of rate projections. Warren Hogan, economic advisor at Judo Bank, tips a rate reduction in November. Chief CBA economist Stephen Halmarick anticipates 0.75% cuts in 2024 and another 0.75% in late 2025.
Meanwhile, Westpac anticipates the first rate cut will occur in August, while NAB forecasts rate drops by November.
However, the general consensus is that victory is in sight in the war against high inflation. Which will be a relief for many home mortgage holders.
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.
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