The RBA’s official cash rate remains at 4.35%, it was announced today, though worries about inflation have resurfaced as near-term rate cuts now appear unlikely.
Any slim hopes of a rate cut today were dashed after ABS data in late April showed the consumer price index (CPI) actually rose in the first quarter, which was above market forecasts.
While Sydney’s home mortgage holders will appreciate today’s rate pause, hopes for a rate cut in the coming months now seem unlikely.
‘Recent information indicates that inflation continues to moderate, but is declining more slowly than expected,’ assessed the RBA today.
The RBA noted that the CPI grew by 3.6% over the year to the March quarter, down from 4.1% over the year to December.
In fact, experts like economist Warren Hogan from Judo Bank are predicting we may need rate rises in 2024, though the consensus appears to be that rates will now stay higher for longer.
Today’s steady as she goes approach makes it six months since the last change to the rate – a 0.25% hike delivered in November 2023.
The RBA kept open the possibility of a rise this year, noting 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.’
Unemployment (which was up to 3.8% in March, though below the forecasted 3.9%, as 6,600 jobs were shed) would have also been taken into consideration ahead of today’s announcement.
Earlier this year, many analysts were bullish on a rate reduction by September at least. Now, the Big Four banks are in agreement that a November or December rate cut is most likely.
If so, it will be a huge relief given that data shows 1.53 million Aussie home mortgage holders were at risk of mortgage stress in March 2024.
But with a flare up in inflation, some analysts are flagging a potential rise this year before any reductions can happen.
Many will hope these inflation concerns are merely temporary and the trend down that we saw late last year continues.
Interestingly, Macquarie Bank, Australia’s fifth-largest lender behind the Big Four, recently cut its standard variable home loan rates for new owner-occupiers.
As customary, there was a cautious note in today’s announcement, with the RBA saying that the economic outlook remains ‘uncertain’ and recent data have demonstrated that ‘the process of returning inflation to target is unlikely to be smooth.’
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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!