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The Reserve Bank has revealed its cash rate decision for Cup Day as inflation begins to break into the RBA’s target range.
RBA announces interest rate decision amid easing inflation
05 November 2024
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7 minute read
The RBA has decided to keep the cash rate target unchanged at 4.35 per cent following its latest board meeting.
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This was widely predicted with all of the economists and commentators featured on the comparison website Finder predicting that rates would stay on hold.
RSM Australia economist Devika Shivadekar said inflation is easing in line with expectations with headline inflation breaking into the upper end of the RBA's target range in the latest quarter.
"However, persistent labour market tightness limits the RBA’s flexibility to ease. Holiday season spending could indicate whether demand is sustainably strong or just temporary, impacting RBA’s rate plans well into 2025," Shivadekar said.
AMP chief economist Shane Oliver agreed that inflation is likely still too high for the RBA to begin cutting.
"It is falling and likely to continue to do so resulting in a start to rate cuts in February next year," Oliver said.
"A December cut is still possible but would need to see a further sharp fall in underlying inflation in October monthly data along with a renewed rise in unemployment."
CreditorWatch chief economist Ivan Colhoun said that some board members may be growing more concerned about the risk of the monetary policy continuing to underachieve on the inflation target, particularly with the relatively low unemployment rate.
"On hold rates will likely not be welcomed by those struggling under high interest rates and high cost of living, however, the Board has been clear that Australian interest rates will remain high until it has greater confidence that inflation will return to target," Colhoun said.
Moody's analytics' Leanne Pilkington agreed that while many consumers may have been hoping for a rate cut prior to Christmas, it appeared the RBA was set on waiting for a consistent downward trend in inflation to materialise.
"The signs are there though, so a rate reduction is warranted in the near term."
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