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The likelihood of a rate hike during today’s monetary policy meeting seems to be slim on the back of “encouraging” recent data.
The Reserve Bank of Australia (RBA) is set to meet for its September meeting later today (5 September) as many anticipate the decision to leave the official cash rate unchanged at 4.1 per cent.
The September monetary policy meeting will mark the last decision for outgoing RBA governor Philip Lowe, as he completes his seven-year tenure with the bank. His successor Michele Bullock will assume the role of RBA governor on 18 September 2023.
The most recent Consumer Price Index (CPI) figures released by the Australian Bureau of Statistics (ABS) revealed that the CPI indicator rose 4.9 per cent in the 12 months to July 2023, down from 5.4 per cent in June 2023 and the lowest annual reading since February.
In what economists have referred to as a “lower-than-expected” result, this is likely to sway the RBA board’s decision, as their crusade against lowering inflation seems to be coming to fruition.
Speaking to The Adviser, executive director at Connective, Mark Haron, said they’d be “surprised to see the cash rate move this month” following the recent drop in inflation over the last few months.
“Any movement north could alarm borrowers who will rely on their broker to help them navigate the complex lending landscape,” Mr Haron said.
However, Mr Haron added that regardless of the RBA’s decision, the pressure of mortgage stress could “stretch well into next year” with the landscape remaining complex for new borrowers.
“We’ve still got thousands more Aussies to roll off their fixed rates and we all know it’s more difficult to move across lenders,” Mr Haron said.
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“Brokers should continue to ensure they’re connecting with their clients, maintaining clear channels of communication and help them understand the actions that [are] best for them.”
Finsure Group chief executive Simon Bednar shared a similar sentiment with The Adviser, also calling a further hold in the cash rate as the central bank continues to observe the impact of their previous hikes.
“There is still the looming fixed interest rate impact for the RBA to consider,” Mr Bednar said.
“I think there are around 40 per cent of the lower fixed rate home loan terms set to expire by the end of 2024, and another 20 per cent by the end of next year. This will continue to push inflation down as home owners cut back on spending to accommodate the increase in mortgage repayments.”
In addition, Australia’s big four banks – ANZ, NAB, Westpac and the Commonwealth Bank of Australia (CBA) – seem to have unanimously agreed that another cash rate increase is unlikely to occur.
Excluding NAB, the major banks’ economists have also predicted that the peak of the cash rate has been realised, with the next movements being cash rate cuts expected in 2024.
NAB has maintained that the cash rate will increase one more time to a peak of 4.35 per cent during the December monetary policy meeting.
[RELATED: Home owners unaware of variable rate post roll-off: AMP Bank]
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