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The RBA has held the cash rate steady while economic uncertainty is still front of mind for the board.
The Reserve Bank of Australia (RBA) has announced that the official cash rate has been held steady at 4.35 per cent in its sixth cash rate hold since November 2023.
While speculations swirled over the RBA potentially increasing the official cash rate during today’s (6 August) meeting, expectations shifted following the release of the June quarter Consumer Price Index (CPI) figures by the Australian Bureau of Statistics (ABS).
Although the CPI figures revealed a lift in annual inflation to 3.8 per cent and a quarterly rise of 1 per cent, this print was largely expected by the RBA.
The RBA's statement following the cash rate decision once again highlighted the uncertainty around the outlook on inflation and the broader economy.
The board referred to the pathway towards the 2–3 per cent inflation target as "slow and bumpy".
"Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
"But inflation is still some way above the midpoint of the 2–3 per cent target range. In underlying terms, as represented by the trimmed mean, the CPI rose by 3.9 per cent over the year to the June quarter ... The latest numbers also demonstrate that inflation is proving persistent. In year-ended terms, underlying inflation has now been above the midpoint of the target for 11 consecutive quarters. And quarterly underlying CPI inflation has fallen very little over the past year," the board said.
The RBA further emphasised its dependency on data and the evolving assessment of risks to guide its decisions, and "remains resolute" to return inflation to target and is ready to "do what is necessary to achieve that outcome".
Commenting on the RBA’s decision, Mortgage Choice CEO, Anthony Waldron said: “The Reserve Bank’s decision to keep the cash rate on hold will be welcome news to borrowers and buyers alike.”
“The RBA’s decision follows the release of the latest quarterly ABS Consumer Price Index, which showed that annual trimmed inflation fell for the sixth consecutive quarter.
“The ongoing stability in home loan interest rates will support buyer and seller confidence heading into the 2024 spring selling season. With less than a month to go, so anyone looking to buy should speak to their mortgage broker to get their finances and pre-approvals in order,” Waldron said.
Executive director at Connective, Mark Haron, said the continued cash rate hold offers a “temporary relief for borrowers”.
“However, with ongoing inflation concerns, we may soon face a landscape where homeowners see their mortgage rates rise three- or four-fold in just two years.
“Our data shows the volume of fixed rate loans expiring holding steady for the rest of the year, and a decrease in refinancing activity, but many borrowers may still need support navigating a potentially trickier lending environment in the coming months,” Haron said.
Haron has urged brokers to identify and reach out to clients requiring support.
“Consistent communication, financial education tailored to their lifestyle goals, and leveraging the right data and tools are all crucial for brokers to effectively support their clients in the current market.”
Simon Bednar, Finsure Group’s CEO, said that recession fears from the US will be weighing on the RBA, and could result in an “earlier than expected” cut in the cash rate.
Bednar said the modest CPI rise took the pressure off the RBA, allowing them to hold the cash rate at 4.35 per cent, in a move that was “no surprise”.
However, with unemployment in the US hitting a three-year high of 4.3 per cent, this poses a “fresh concern” for the RBA with “talk of a recession already spooking global markets”.
“If the US experiences a slowdown as seen with the cooling off of their job market, our RBA may be forced to lower rates slightly earlier than expected,” he said.
“We might see a first downward movement since the RBA started increasing the cash rate in May 2022, by the end of the year, rather than early in 2025.”
[RELATED: RBA should not ‘jump the gun’ on rates]
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