Guess who's coming to town with a sack full of good news? The Reserve Bank of Australia (RBA), that's who!
Guess who's coming to town with a sack full of good news? It's the Reserve Bank of Australia.
This holiday season, they're spreading cheer by keeping the cash rate steady at 4.35%.
All four big banks predicted that the cash rate would remain steady this month, and all four were correct.
The biggest indicator that we’d see a cash rate pause this month came from the monthly inflation figure, which dropped to 4.9% in October. This was the lowest inflation figure since July (also 4.9%).
But let’s just make things clear: inflation hasn’t gone down, it’s just increased at a slower rate than before.
The baddies driving inflation in the October month were:
But despite the fear of festive splurging, the RBA thinks we don't need another rate hike to tame the inflation beast… at least right now.
This is a massive relief for mortgage holders, with over 30% of Australian borrowers or 1.57 million, currently in mortgage stress.
And in even better news, the RBA doesn’t meet in January so that’s two blissful months of rate-rise-free living!
Are we done with cash rate rises now?
According to the OECD’s economic outlook report, we’ve seen the last of the cash rate rises.
They predict that the cash rate will remain at 4.35% until the third quarter of 2024, and from there will slowly begin to drop.
However, while inflation has dropped from its peak of 7.8% to 4.9%, it’s still playing hard-to-get, sitting well above the RBA’s target rate of 2-3%.
And because inflation isn’t always predictable, until the RBA’s target inflation is reached, future rate rises aren’t off the cards.
When the RBA increases the cash rate, the banks will almost always follow suit and raise the interest rate on your loan.
Experts say it takes around two or three months for individuals to feel the full impact of a rate rise on their cash flow… so the impact of these successive rises won’t be felt until the new year.
And your interest rate on your savings account should increase too (but often doesn’t increase to the same extent).
You're not imagining it, they are! But it probably feels even higher because in May 2022, the cash rate was at a historic low of 0.1%.
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