RBA holds cash rate in August, as inflation meets expectations
The Reserve Bank of Australia (RBA) has today held the official cash rate at 4.35% after the Consumer Price Index (CPI) recorded a slight drop in trimmed mean inflation over the June quarter of 2024.
A statement from the RBA says inflation remains above target and is proving consistent:
“Inflation has fallen substantially since its peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance. But inflation is still some way above the midpoint of the 2–3 per cent target range,” the statement read.
As Mozo personal finance expert, Rachel Wastell, discussed in last week’s Mozo Money Moves, the slight uptick in headline inflation over the quarter prompted discussion of what the RBA’s next interest rate move would bring.
But it was ultimately the trimmed mean figure dropping by 0.1%, now 3.9%, that is enough for the RBA to leave the cash rate unchanged for a seventh consecutive monetary policy decision. This is broadly in line with the RBA’s CPI Inflation Forecasts , where it wants to see inflation below 3% by the end of 2025.
It’s a bittersweet announcement for home loan borrowers: no guarantee of rate cuts, but less of a chance of rate hikes.
“With property prices continuing their upward trajectory, Australian home buyers are taking on larger mortgages than ever before, placing even more financial pressure on households already grappling with high interest rates,” says Wastell.
“It's never been more crucial for borrowers who do meet serviceability requirements to shop around and see if they can get a lower rate. A small difference in rates on such large loan sizes can result in tens of thousands of dollars in interest saved over the life of a loan.”
The jury is still out for when interest rates will finally come down. But, economists at the Big Four banks are forecasting a cut either for November this year, or February/May 2025.
Read last month's Reserve Bank interest rates update.
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