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The Reserve Bank has announced its cash rate decision for December.
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RBA delivers final interest rate decision for 2024
10 December 2024
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As widely expected, the Reserve Bank of Australia has decided to leave the cash rate target unchanged at 4.35 per cent.
AMP chief economist Shane Oliver said while AMP still expects the first rate cut to be in May, weakening GDP growth could see the RBA downgrade their growth expectations, reducing its concerns about excess demand in the economy.
“Taken together with output price pressures in various business surveys this indicates the RBA should be considering a rate cut sooner rather than later,” said Oliver.
“While we moved our base case for the first cut out to May on the grounds that the RBA appears to be in no hurry to cut rates, a good December quarter trimmed mean inflation reading could push it over the line to cut in February given the softness we have seen in GDP.”
A February cut is even more likely if the upcoming jobs data is softer, he added.
Oliver noted that money market expectations have also become less hawkish, with the market predicting a 55 per cent chance of a cut in February, and a cut fully priced in for April.
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“A week ago, that wasn’t the case until May,” he said.
Dale Gillham from Wealth Within said while the RBA has likely kept rate high for Christmas in an effort to curb spending, the easing of rates is now overdue.
“Once the festive season is over and everyone has their credit card statements, I think rates will start to drop,” said Gillham.
University of Sydney economist Stella Huangfu said a rate cut may be further away with core inflation still above the RBA’s target of 2-3 per cent.
“RBA Governor Michele Bullock has stated that inflation is still too high for rate cuts anytime soon and that interest rates will stay high until inflation consistently falls within the target range,” said Huangfu.
Craig Emerson from Emerson Economics said by April 2025, the headline inflation rate will have been within the 2-3 per cent target range for more than half a year, real per capita GDP will have been negative for an inordinately long time and the RBA will have run out of reasons to maintain the cash rate at its existing level.
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