The RBA has once again decided to hold the cash rate at 4.35%
After five cash rate pauses in a row, homeowners have been on the edge of their seat.
“Surely it’s time for a drop”
“Surely it’s time for a drop”
“SURELY the RBA will follow the US Federal Reserve and make an interest rate cut”
While last week, the US Federal Reserve made its first interest rate cut in four years, the RBA was in no mood to dish out a cash rate cut here in Australia.
That means for the time being, the RBA has once again held the cash rate at 4.35% - for the sixth time in a row.
Traditionally the RBA and most central banks have followed the US Federal Reserve, but lately the RBA wants everyone to know that it’s sticking to its guns.
That means, we’re probably not getting any cash rate cuts until 2025.
Don’t shoot the messenger - that’s what the big banks are predicting.
Here’s when the big four banks are predicting the first cash rate cut will happen:
Those dates might still be a while away, but following the US Federal Reserve’s rate cut last week, pressure is ramping up for the RBA to follow suit.
According to the latest monthly CPI indicator, annual inflation came in at 3.5% for the 12 months to July 2024.
But that number is expected to drop to within the RBA’s 2% - 3% target range when new CPI data is released tomorrow…a day after the RBA’s cash rate decision.
This inflation drop is expected largely thanks to the impact of government energy rebates, and slower wage growth.
But the RBA doesn’t like to focus on temporary cost-of-living relief when it comes to analysing underlying inflation.
So while the US is celebrating its first rate cut in the last four years, it looks like we’ll be waiting a few more months before we can join in on the celebrations.
Hang in there homeowners!
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).
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 two months.
Here’s what that’s looked like:
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