There will be no Christmas mortgage payment relief for home loan holders after the Reserve Bank of Australia (RBA) kept the official cash rate unchanged in what was a widely expected move.
In the post-meeting statement, the RBA board said underlying inflation remained “too high”, and kept rates unchanged at 4.35 percent for the ninth consecutive meeting.
“The November statement on monetary policy forecasts suggests that it will still be some time before inflation is sustainably within the target range and approaches the midpoint,” the board said in its statement. .
The RBA wants to rein in inflation to stay within its target range of 2 to 3 percent.
Headline inflation stood at 2.8 per cent for the September quarter, but the RBA focused on underlying price measures, which took longer to moderate. Core inflation was 3.5 percent over the same period.
But the board said it is “gaining some confidence that inflation is moving sustainably toward its target.”
RBA Governor Michele Bullock said this was reflected in the board’s statement on Tuesday after a reporter questioned why the terms “vigilant” and “no decision to enter or exit” seen in previous statements had been removed.
The November statement said it would be “some more time” before inflation was sustainably within the RBA’s target range, which “reinforced the need to remain vigilant against upside risks to the inflation and the Council does not exclude anything admissible or exclude anything.
But Tuesday’s statement said: “It will still be some time before inflation is sustainably within the target range and near the midpoint.”
Bullock said that was “deliberate” and that the board “wanted to send the message that they noticed some of the data was a little weaker” — in some cases, weaker than expected.
“We’re not saying what we might do but we recognize that there is some slowing and our forecast is for a gradual return of inflation over the next year,” Bullock told reporters.
She added: “We’re saying we’re a little more confident that things are moving the way we think they will in our forecast.”
When can Australians expect a rate cut?
Mortgage holders are eagerly awaiting a cut in interest rates, and while economists and markets are broadly in agreement that the next cut will be a cut, speculation over the timing of the easing is growing. continue.
Sally Tindall, director of data analytics at financial comparison site Canstar, said this year had been incredibly difficult for households with a mortgage, “especially those who had very little money to begin with”.
“While there has been some small relief from stage three tax cuts and government electricity rebates, for many families this extra money has barely touched the sides,” Tindall said.
NAB, Westpac and ANZ predict the interest rate cut won’t come until May, while the Commonwealth Bank predicts February.
Tony Sycamore, market analyst at financial markets trading firm IG, says he is more optimistic.
“While it is premature for the RBA to fly its ‘mission accomplished’ flag, today’s dovish pivot has paved the way for a rate cut in February,” Sycamore said.
Sean Langcake, head of macroeconomic forecasting at Oxford Economics Australia, said the RBA board had become somewhat more optimistic about the outlook, observing that some upside inflation risks had eased.
“They noted that wage growth was slower than expected in the September quarter and that they are increasingly confident that inflation is moving sustainably towards its target,” he said. declared.
“But that doesn’t mean rate cuts are imminent.”
Before cutting borrowing costs, the economist believes the central bank will want to see two more sets of quarterly inflation data showing an easing of underlying price pressures.
This brings the easing start date back to May, according to Langcake.
The RBA noted that Australia’s economic growth was at its weakest since the 1990s, outside of the COVID-19 pandemic.
September quarter data shows the economy grew by just 0.8 percent over the past year.
The RBA also says the labor market has been “tight”, with unemployment falling over the past three months and labor force participation rates at record levels, while wage growth has been weaker than expected.
Tindall said the economy was “on life support”.
However, she said: “The continued strength in the labor market has given the central bank much-needed time to do its job properly on inflation. »
“The RBA is not going to miss this opportunity by cutting rates early,” Tindall said.
The RBA board will next meet in February 2025.
With reporting from the Australian Associated Press.
