RBA rate remains stable on Cup Day
The official cash rate remains stable at 4.35% after today’s RBA board meeting which concluded just before the running of the Melbourne Cup.
Given encouraging inflation data in the last week, some market analysts had been having an each-way bet on a change to the official cash rate today.
That wasn’t to be. Cashed-up investors held off first homebuyers by a short half head. However, a cut in the coming months is still very much a hot tip as the Central Bank continues to rein in what was a galloping inflation rate barely two years ago.
And what could be viewed as a blow to lower rates in the short term, forecasts do not see inflation returning ‘sustainably to the midpoint of the target until 2026’, said the RBA today.
‘Sustainably returning inflation to target within a reasonable timeframe remains the Board’s highest priority. This is consistent with the RBA’s mandate for price stability and full employment.’
The inflation numbers released last week saw the CPI fall to 2.8% – its lowest level since 2021.
Crucially, this is within the RBA’s target band of 2-3%.
However – and it’s this point that could keep rates on hold for longer than anticipated given the inherent volatility in the rate – the RBA wants inflation to remain ‘sustainably’ in this band.
The Central Bank previously said that policy will need to be sufficiently restrictive until the Board is confident that ‘inflation is moving sustainably towards the target range.’
That said, Australia is at odds with the US Federal Reserve and other major economies’ central banks.
In recent months, the US Feds delivered a super-sized rate cut and the Bank of England has, likewise, begun cutting.
Though, as the RBA also said today in relation to this global trend, ‘There remains a high level of uncertainty about the outlook abroad.
‘Most central banks have eased monetary policy as they become more confident that inflation is moving sustainably back towards their respective targets.
‘They note, however, that they are removing only some restrictiveness and remain alert to risks on both sides, namely weaker labour markets and stronger inflation.’
Most market experts are expecting the RBA to cut by February 2025, though others, like ANZ boss Shayne Elliott, believe reductions may be ‘a little further away’.
Speaking of local banks and lenders, last month seven lenders reduced their rates by an average of 0.3 percentage points. Four other lenders cut variable rates by smaller amounts.
If you would like to review your home loan arrangements, contact Mortgage Broker Group.
We can help you 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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