After February’s excitement of a first official rate cut since late 2020, the RBA took a conservative approach today, holding at 4.10% following its monetary policy board meeting.
‘Recent information suggests that underlying inflation continues to ease in line with the most recent forecasts published in the February Statement on Monetary Policy,’ said the RBA today.
The Central Bank added that monetary policy ‘is well placed to respond to international developments if they were to have material implications for Australian activity and inflation.’
Inflation is clearly in a good place right now.
Headline inflation for February was 2.4%, a slight decrease from the previous month, while the “trimmed mean” (the RBA’s preferred measure) dropped to 2.7% from 2.8%.
The RBA’s target range is 2-3%. So, right now, things are looking good. Has the war against inflation been won? The data suggests it has.
Unsurprisingly after February’s rate cut, Australian household confidence is flooding back. In March, the Westpac-Melbourne Institute Consumer Sentiment Index rose 4%, hitting 95.9, up from February’s 92.2.
Of course, some analysts argue the RBA waited too long to cut rates, though the Central Bank’s view was that it needed ‘sustained’ lower inflation before cutting.
After more than a year of stability at 4.35%, the RBA’s February rate cut of 0.25% took it down to 4.10%. It was expected to lower monthly mortgage repayments by $90–$150.
However, when the cash rate drops, it doesn’t automatically translate into lower interest rates for consumers.
Did your bank or lender pass on the savings promptly? Virgin Money didn’t, but said their rates were already lower than the market. Hmmm.
Analysts are already saying that with inflation clearly easing, we may see another cut in May, just after the federal election. That’ll be nice news for whoever wins.
Still, there are concerns over US tariffs and their effect on world economies.
‘The recent announcements from the United States on tariffs are having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures,” added the RBA.
‘Geopolitical uncertainties are also pronounced. These developments are expected to have an adverse effect on global activity.
‘Inflation, however, could move in either direction.
‘Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks,’ it concluded.
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Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!