Major blow for Aussies just before Christmas as Reserve Bank makes interest rate decision
- The Reserve Bank refuses to cut interest rates
Australian home borrowers have been dealt a major blow just before Christmas as the Reserve Bank denied them a rate cut.
The cash rate remained at 4.35 percent on Tuesday afternoon, now higher than the equivalent policy rate in New Zealand and Canada, as other first world countries receive aid.
Governor Michele Bullock gave a strong hint that rate cuts could take months to come with inflation still too high.
“The administration remains steadfast in its determination to return inflation to target levels and will do whatever is necessary to achieve that outcome,” she said.
The Reserve Bank left the cash rate unchanged at its final board meeting for 2024, but stressed that underlying inflation of 3.5 percent is still too high and well above the 2 to 3 percent target.
“While headline inflation has fallen significantly and will remain lower for some time, underlying inflation is more indicative of the momentum of inflation and remains too high,” the report said.
Headline inflation is at a three-year low of 2.8 percent, but the RBA expects it to rise to 3.7 percent by the end of 2025 after the federal government’s $300 electricity rebates expire mid-year.
Relief from the RBA’s 13 increases in 2022 and 2023 is also being postponed, despite the Australian economy growing by just 0.8 per cent in the year to September – the slowest growth since the 1991 recession, barring a pandemic.
Australian home borrowers were dealt a major blow just before Christmas, with the Reserve Bank denying them a rate cut (pictured is a Sydney customer)
Westpac, NAB and ANZ won’t see a rate cut until May next year.
But the volatile futures market is now pricing in three rate cuts in 2025.
The RBA this month removed the phrase ‘nothing in or out’ – in a sign that another rate hike is now off the table as inflation continues to moderate.
“The board is gaining some confidence that inflation is moving sustainably towards the target,” the report said.
However, the Reserve Bank noted that global uncertainty could fuel global inflationary pressures, with Donald Trump set to take over the presidency on January 20 with a plan for broad import tariffs of 10 to 20 percent.
Ms Bullock will address the media at 3.30pm Sydney time.