In a widely anticipated move, the Reserve Bank of Australia (RBA) has decided to keep the official cash rate unchanged at 4.35% for the 5th consecutive meeting but admitted the outlook is still uncertain. This decision, announced today following the RBA’s June board meeting, comes amidst ongoing challenges posed by persistent inflation and recent employment data.
The decision comes with little surprise to economists and others in the industry, evidenced by the fact that ASX’s RBA Rate Tracker had the chance of a rate hold at 95%.
Whilst most economists are still reasonably confident that another rate hike is highly unlikely the RBA has warned in its statement following the June meeting that the future ‘outlook remains highly uncertain’ and that the process of getting inflation back to normal levels is ‘unlikely to be smooth’. Many economists are still tipping that the next movement in the cash rate will be a downward one, however there is a common theme which suggests any decrease to the cash rate may be a little further away than initially expected with many in agreeance that a rate cut is unlikely until 2025.
ANZ has recently pushed back its expected timeline for a rate decrease to February 2025, having initially predicted a cut as soon as November 2024, whilst CBA is still hopeful for a decrease later in the year.
If there is a further upwards trend in inflation numbers following the June quarter, it may prompt the Reserve Bank’s board to consider increasing the cash rate in August, although this is considered unlikely at this point. VanEck’s head of investments & capital markets, Russel Chesler, echoed this sentiment stating “The most likely scenario is an extended pause in any policy rate adjustment until the RBA is convinced that its current trajectory for the return of inflation to target is secure. That argues for a policy rate cut toward the end of the year or sometime in the first half of 2025.”
While today’s decision keeps interest rates unchanged, the RBA remains primed to act to ensure inflation returns to target over the medium term.
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