RBA Rates Announcement June 2024

18.06.24 | Michael Brown | News

The official cash rate remains at 4.35%, though analysts are split on whether the RBA will need to increase or reduce rates in the near term.

In its statement today, Australia’s central bank noted that the current economic conditions didn’t warrant a change, though some market experts now believe a rate rise is coming soon.

The RBA said today that ‘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 the pace of decline has slowed in the most recent data, with inflation still some way above the midpoint of the 2–3 per cent target range.’

So, no change to the highest official cash rate in over a decade as the RBA grapples with stubbornly higher inflation, flat GDP growth and dropping unemployment figures.

What is clear is that the RBA today was not influenced by its global counterparts after the European Central Bank and Bank of Canada earlier this month became the first central banks of major economies to cut the official cash rate.

And, of course, today’s RBA board meeting marked the first one since last month’s federal budget.

The Treasurer’s budget measures provided welcome financial relief to households and business, though the large-scale spending is at odds with the RBA’s inflation reducing goals.

No surprise, then, that ratings house S&P Global described the federal budget as ‘mildly inflationary’. Even the RBA’s internal analysis came to a similar conclusion.

Tellingly, in May’s budget papers, the government forecast was for the cash rate to ‘gradually ease from around the middle of 2025 to reach 3.6 per cent by the middle of 2026.’

Right now, though, experts such as economist Warren Hogan believe that after critical economic data comes to hand, there will be a rate rise when the RBA next meets in August.

CBA chief economist Stephen Halmarick, however, tipped the RBA to cut interest rates in November this year. ‘The economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth,’ noted the RBA.

Who knows what will happen with rates for Sydney homeowners in the second half of 2024. The RBA is keeping its options open, saying that the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain ‘and the Board is not ruling anything in or out.’

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