min read
· Posted on
February 21, 2024

Interest rates July 2023: No rate rise means some breathing space for Aussies

The RBA had decided to hold to cash rate this month at 4.10%

What's the key learning?

We thought the RBA was back to its old tricks but they’ve surprised us this month by leaving the cash rate untouched.

That means the cash rate will remain at 4.1% for the month of July.

We’ve been biting our nails on the first Tuesday of every month since May 2022 (when the RBA first started raising rates).

In that time, the cash rate has gone up from 0.1% to 4.1%. 

So why has the RBA held the cash rate?

The RBA’s decision to hold the cash rate this month isn’t totally unexpected because this month's CPI data shows that inflation has fallen to a 13 month low.

The latest inflation data shows that inflation rose to 5.6% in the 12 months to May, meaning prices today are 5.6% higher than they were in May last year.

This is however a decrease from the April figure of 6.8%

And while that’s great news, inflation still hasn’t hit the RBA’s target level of 2-3%, which the RBA’s gunning for by mid 2025.

But, the RBA might be holding the cash rate this month to buy some time and get a clearer picture of what TF is actually going on with inflation.

There are clear signs of inflation cooling down in some parts of the economy, but not all, and we haven’t felt the full impact of the cash rate rises so far.

So, even though there’s no cash rate rise this month, it can’t be ruled out completely for the future.

Remind me, what happens when interest rates rise?

When the RBA increases the cash rate, the banks will almost always follow suit and raise the interest rate on your loan, think mortgages and business loans. 

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).

Here’s a recap of the rises this year:

  • May 4th 2022: 0.35%
  • June 8th 2022: 0.85%
  • July 6th 2022: 1.35%
  • August 3rd 2022: 1.85%
  • September 6th 2022: 2.35%
  • October 4th 2022: 2.60%
  • November 1st 2022: 2.85%
  • December 6th 2022: 3.1%
  • February 7th 2023: 3.35%
  • March 7th 2023: 3.60%
  • April 4th 2023: 3.60%
  • May 2nd 2023: 3.85%
  • June 6th 2023: 4.10%
  • July 4th 2023: 4.10%

It can be a little confusing to understand how these cash rate increases actually impact the broader economy. And now that we're at the midpoint of 2023, we deep dive into understanding how the cash rate has impacted the economy so far. Check out the article here.

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