The RBA maintained the official cash rate at 4.35% following today’s final board meeting for 2024.
The RBA again reiterated that by 2026 the inflation rate will be ‘sustainably’ in the 2–3% target band, according to its current forecasting.
So, no early Christmas gift from the RBA for Melbourne borrowers after a year which began with confident market forecasts of a cut by Q3.
In fact, the Central Bank’s 4.35% official cash rate has stayed on hold for the entire year. And perhaps they will stay at this rate for a while longer?
The annual inflation rate is now at 2.8%, and within the RBA’s target range of 2–3%, which is good news.
However, the RBA is also focused on underlying price measures, which are taking longer to ease.
‘The most recent forecasts published in the November Statement on Monetary Policy (SMP) do not see inflation returning sustainably to the midpoint of the target until 2026,’ said the RBA today. ‘Measures of underlying inflation are around 3½ per cent, which is still some way from the 2.5 per cent midpoint of the inflation target.’
That said, with some lenders already dropping some rates, many market experts and banks are now anticipating the RBA to cut in the first six months of 2025.
This view was underlined by RBA board meeting minutes in November which noted that it wants to see more than one good quarterly inflation number before it would be confident enough to cut its rate.
Based on this timeline, there would have been two sets of quarterly inflation reports to digest by the end of April 2025.
If these reports were positive, then the board meeting on 20 May 2025 could – emphasis on ‘could’ – be the big day when the official cash rate is reduced.
But of course, much can happen over the next six months – both globally and nationally – which can affect Australia’s economy. Adding to the rates debate is the impending federal election, which must be called sometime before 17 May next year.
What do major banks think about rate cuts?
Westpac updated its outlook last month, tipping consecutive reductions in late May and early July. Other major banks believe the first rate cut could happen in February followed by a gradual rate of reductions.
‘The Board remains resolute in its determination to return inflation to target,’ concluded today’s statement from Sydney HQ in Martin Place, ‘and will do what is necessary to achieve that outcome.’
If you would like to review your home loan arrangements, contact Mortgage Broker Melbourne. We are one of the most positively reviewed mortgage brokers in Melbourne.
Additionally, we can offer you tips on how to uncover lower rates, boost your savings, consolidate other debts and take the pressure off increases in household costs.
Finally, on behalf of the team in Melbourne, we wish all our valued clients a joyful festive season. Here’s to a safe and prosperous New Year to all.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!