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The RBA has called the cash rate for October, however, threats of another cash rate hike loom, an aggregator's chief executive has said.
The Reserve Bank of Australia (RBA) has decided to hold the official cash rate at 4.1 per cent following its October monetary policy meeting today (3 October) for the fourth consecutive time.
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The October board meeting has marked the inaugural meeting for new RBA governor Michele Bullock, who took the reins on 18 September, after former governor Philip Lowe’s departure.
On the decision, Ms Bullock said: “The recent data are consistent with inflation returning to the 2–3 per cent target range over the forecast period and with output and employment continuing to grow. Inflation is coming down, the labour market remains strong and the economy is operating at a high level of capacity utilisation, although growth has slowed.
“There are significant uncertainties around the outlook. Services price inflation has been surprisingly persistent overseas and the same could occur in Australia.
“There are also uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages respond to the slower growth in the economy at a time when the labour market remains tight.
“The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income.
“Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable time frame, but that will continue to depend upon the data and the evolving assessment of risks.”
Finsure Group chief executive Simon Bednar predicted that the RBA would likely hold the cash rate at 4.1 per cent as Ms Bullock settled into her role.
“Despite a rise in the inflation rate in the 12 months to August, 2023, to 5.2 per cent, the RBA was expected to stay on hold again this month at the first board meeting with Michele Bullock as the new RBA Governor,” he said.
However, Mr Bednar warned that “we’re definitely not out of the woods yet”, as external pressures, especially from higher petrol prices, leaves a looming chance of another rate hike before the holiday season.
He added that the RBA still needed to observe the full effects of the 12 cash rate hikes imposed since May 2022, which are yet to hit “thousands of mortgage holders coming off long term, fixed rates”.
“Around 40 per cent of the lower fixed rate home loan terms are set to expire by the end of 2024, and another 20 per cent by the end of next year, and this will have an impact on the economy as home owners cut back on spending to accommodate the increase in mortgage repayments,” Mr Bednar said.
Reacting to the decision, Mortgage Choice CEO Anthony Waldron said he expects “borrowers and hopeful buyers alike will be pleased about this decision, which gives Australians some breathing room.”
According to Mr Waldron, the latest monthly Consumer Price Index (CPI) indicator for August released by the Australian Bureau of Statistics (ABS) “made the case” for the central bank to hold the cash rate steady, notwithstanding the uptick in inflation, echoing Mr Bednar’s previous sentiment.
Executive director of aggregation group Connective, Mark Haron, said that while the hold will provide mortgage holders with continued relief, the “complexity of the borrowing landscape persists”.
“Our most recent research tells us that 85 per cent of borrowers want their brokers to make them feel at ease during the home loan process,” Mr Haron added.
“Brokers are guiding clients through significant financial decisions and milestones in a complex lending environment and uncertain market conditions.
“The most successful brokers put their clients at ease by being reliable, credible, and providing peace of mind and emotional support beyond the functional benefits.”
Pause predictions ‘unanimous’
Prior to today’s board meeting, the Finder RBA Cash Rate Survey found that all 38 of its respondents (consisting of economists and financial commentators) had “unanimously” agreed that the RBA will hold the cash rate.
Additionally, three of the big four major banks (CBA, ANZ, and Westpac) also agreed that the cash rate pause would continue.
While also predicting a pause this month, NAB remained as an outlier in regard to the cash rate peak, having forecast a final rate hike to bring the cash rate to 4.35 per cent next month in November.
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