It’s come as no surprise today that the RBA has once again decided to hold the cash rate steady at 4.35%. 

Regardless, mortgage holders are wiping their brows, knowing they’ve been saved from interest rate hikes for at least another seven weeks.

The cash rate has now been held at 4.35% since November 2023, which was predicted by all four big banks and all 41 experts surveyed in Finder’s RBA cash rate survey.

Their prediction is in response to inflation continuing to drop. 

The latest ABS data shows monthly inflation excluding volatile items (things like fuel which tend to be unpredictable in price) was 4.1% in January, down from 4.2% in December 2023.

BTW, CPI is how the government measures inflation. You can read more about it here.

As a quick reminder, slowing inflation doesn’t mean that prices are coming down, but that prices are rising slower than previous months. 

And while inflation still hasn’t fallen within the RBA’s desired range of 2-3%, it has stalled. The RBA’s cash rate hikes have caught up to everyday Australians, and are putting some pressure on inflation.

Are we done with cash rate rises now?

The general consensus between economists is that we are indeed done with cash rate rises.

But it’s hard to tell at this stage when we can expect the cash rate to start coming down. 

It’s likely that the RBA will wait at least till after the stage-three tax cuts, which will increase household disposable income by 1.5%, to see how they impact inflation.

71% of the experts and economists surveyed by Finder believe that the slowdown in inflation will bring forward cash rate cuts.

However, one in four believe that the cash rate will be held at 4.35% until 2025.

Remind me, what happens when interest rates rise?

When the RBA increases the cash rate, the banks will almost always follow suit and raise the interest rate on your loan. 

Experts say it takes around two or three months for individuals to feel the full impact of a rate rise on their cash flow… so we haven’t felt the full impact of these past successive rises.

And your interest rate on your savings account should increase too (but often doesn’t increase to the same extent).

And why is the cash rate so high at the moment?

As recently as May 2022, interest rates were at a historic low of 0.1% and economic conditions in Australia were pretty stable. 

But with economic slowdown coming out of the pandemic, and  geo-political tensions globally, inflation has skyrocketed. The RBA has gone hardcore with thirteen cash rate increases in the past twenty one months.

Here’s what that’s looked like:

And now it’s a waiting game until the RBA graces us with a cash rate cut.