RBA: steady as she goes
The official cash rate remains at 4.35%, despite last week’s rate drop by the US Federal Reserve.
Interestingly, Australia’s Central Bank noted today that it doesn’t expect inflation to be back in the target range sustainably till 2026. ‘The most recent projections in the August SMP show that it will be some time yet before inflation is sustainably in the target range.
‘Our current forecasts do not see inflation returning sustainably to target until 2026,’ said the RBA statement today. That’s a blow for those who hoped for some significant movement down on rates by next year.
So, the official cash rate stays at 4.35% despite domestic political pressures, global central bank trends and financial analysts’ speculation.
The US Fed dropped their rate last week, and last month the Bank of England did the same. However, if you listen to RBA Governor Michele Bullock’s public statements in the last few months, today is no surprise with a cut not in the ‘near term’ thinking.
The Federal Treasurer certainly hopes there’ll be a cut soon. Jim Chalmers has said that elevated interest rates are ‘smashing the economy’.
RBA Governor Bullock wouldn’t be drawn into a war of words on interest rates, but you get the sense caution is the Central Bank’s byword for now as it monitors the inflation rate.
So, what do the market experts think? Westpac Group Chief Economist Luci Ellis agrees that the RBA will not cut the cash rate until inflation is sustainably within the 2–3% target range.
Interestingly, some Big Four banks are already adjusting down their term deposit rates ahead of any potential RBA moves down.
‘Headline inflation declined in July, as measured by the monthly CPI indicator. Headline inflation is expected to fall further temporarily, as a result of federal and state cost of living relief,’ added the Central Bank.
‘However, our current forecasts do not see inflation returning sustainably to target until 2026. ‘The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome,’ concluded the RBA.
There are two RBA monetary policy meetings scheduled for the remainder of this year: November 5 (Melbourne Cup Day) and December 10. It’s a smart idea to compare your home loan mortgage rates to find the best deals in Melbourne.
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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!