RBA Rates Announcement June 2024

18.06.24 | Marc Barlow | News

The official cash rate remains unchanged with the RBA holding it at 4.35% today despite other major central banks around the world beginning rate reductions.

With inflationary pressures remaining ‘sticky’ in Australia, today’s announcement underscores the RBA’s tricky balancing act as it charts a course for the 2–3% inflation band.

Australia’s Central Bank said today that ‘while inflation is easing, it has been doing so more slowly than previously expected and it remains high.

‘The Board expects that it will be some time yet before inflation is sustainably in the target range.’

The Central Bank added today that the ‘economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth.’

As an example of how inflation is proving trickier to control, minutes from the RBA’s previous board meeting in May revealed the decision to hold steady was not unanimous, with board members considering a rise and a hold.

Seemingly, there was little appetite for a cut. Unlike policymakers at other central banks.

The European Central Bank and Bank of Canada became the first central banks of major economies to cut interest rates earlier this month.

Perhaps the RBA board took into consideration last month’s Federal Budget in today’s decision.

Treasurer Jim Chalmers’ budget had a strong focus on spending with a raft of cost-of-living relief measures for households and businesses. Which is why some market analysts noted that the Budget –which frontloaded around $24 billion in spending over the next two years – may work against the RBA’s efforts to curb higher than desired inflation.

Even the government flagged this in May’s budget papers (buried deep in the document) that the cash rate is ‘assumed to gradually ease from around the middle of 2025 to reach 3.6 per cent by the middle of 2026.’

However, experts like Warren Hogan believe there will be a need for a rate rise in August, while CBA chief economist Stephen Halmarick tips the RBA to cut interest rates in November this year.

Right now, it’s anyone’s guess what will happen in 2024 and how it will impact on Melbourne mortgage holders.

The RBA added today that the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe ‘remains uncertain’ and that ‘the Board is not ruling anything in or out.’Read into that what you will.

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