While inflation appears to be the way down and the economy is slowing, the RBA still appears hesitant to take the financial strain off home loan borrowers.
It's decided to keep the brakes on the economy over the holiday season, with the next chance to loosen them to come in February 2025.
"The board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts, but risks remain," the RBA's post-meeting statement, released on Tuesday afternoon, reads.
"Some of the upside risks to inflation appear to have eased and while the level of aggregate demand still appears to be above the economy’s supply capacity, that gap continues to close.
"The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome."
The RBA cash rate determines, among other things, the cost of doing business for banks, and therefore influences the interest rates banks and lenders charge consumers.
The higher the cash rate, the less money borrowers presumably have to spend, and less likely they are to drive demand for goods and services, thereby fueling inflation.
RBA governor Michele Bullock will appear at a press conference at 3:30pm AEDT where she is expected to provide additional insights into today's decision.
Financial pressure on homeowners eases
While rate cuts remain elusive, mortgage borrowers appear to be holding up.
Mortgage stress among Australians has eased for four consecutive months, according to Roy Morgan research.
More than 26% of home loan holders remain 'at risk' of mortgage stress - 4% fewer than before the stage 3 tax cuts were implemented.
"The RBA is likely to keep rates on hold through the first quarter of 2025, unless there is an external shock or significant shifts in unemployment or underlying inflation, as it aims to sustainably return inflation to target," REA Group senior economist Eleanor Creagh said.
"Households remain under pressure and consumers remain cautious, choosing to save a large portion of July's tax cuts.
When will rate cuts begin?
NAB, Westpac, and ANZ have each pushed back their forecast for the first RBA rate cut from February to May, with CommBank left alone in tipping a cut at the central bank's next meeting.
The market appears even more optimistic on the first cut, however.
According to the ASX rate tracker, traders are pricing in a rate cut at the RBA's April meeting, which will begin on 31 March, a second cut by July, and a third by December.
That would see the cash rate at around 3.60% by next year's end - a similar forecast as that put forward by NAB.
Meanwhile, ANZ is expecting the cash rate to drop just twice in 2025, ending the year at 3.85% and both CommBank and Westpac are forecasting four cuts, dropping the rate to 3.35% by this time next year.
Advertisement
Lender Home Loan Interest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees Max LVR Lump Sum Repayment Extra Repayments Split Loan Option Tags Features Link Compare Promoted Product Disclosure
Promoted
Disclosure
Disclosure
Promoted
Disclosure
Image by rawpixel.com on freepik
Collections: RBA Interest Rates Cash Rates Mortgage News
Share