Today the Reserve Bank of Australia held the official cash rate at 3.6%, opting for a strategic pause, though some analysts still believe another cut is still possible this year.
The decision is in keeping with the RBA’s cautious easing of rates and likely took into consideration an elevated headline inflation rate for August.
Australia’s Central Bank explained today that ‘recent data, while partial and volatile, suggest that inflation in the September quarter may be higher than expected.
‘With signs that private demand is recovering,’ the RBA added, ‘indications that inflation may be persistent in some areas and labour market conditions overall remaining stable, the Board decided that it was appropriate to maintain the cash rate at its current level.’
The good news for home loan mortgage holders in Melbourne is that most analysts are still bullish about the direction of inflation – and three official rate cuts this year show that the RBA is happy to cautiously lower rates.
What’s clear is that inflation has been brought down to within the RBA’s own 2–3% target band. Both headline and trimmed mean inflation were within this range in the June quarter.
But, as a reminder that inflation can bounce around somewhat, the headline rate for August jumped to 3.0% from 2.8% in July.
That was a surprise and even prompted some to speculate that an increase could be delivered today.
However, the annual trimmed mean – the RBA’s preferred measure of inflation – dropped to 2.6% in August. This may have been the deciding factor in today’s decision.
So, while this data shows that inflation can be a little volatile on a month-by-month basis, the RBA remains on guard and will put more store in the next quarterly figures out in late October.
In fact, Central Bank Governor Michele Bullock alluded to increased consumer spending in a recent speech, saying this was a good sign, “but if it keeps going, then there may not be many interest-rate declines left to come, but it all depends.”
While rate trajectories remain uncertain the central bank today added that uncertainty in the global economy remains elevated but not too volatile right now.
‘There is a little more clarity on the scope and scale of US tariffs and policy responses in other countries, suggesting that more extreme outcomes are likely to be avoided.’
Should we see a fourth drop from the RBA in 2025, you can find out more in our recently published article on preparing for a rate cut.
If you would like to review your mortgage rate, 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.
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!