min read
· Posted on
May 7, 2024

Interest rates May 2024: Australians collectively sigh in relief as the RBA announces a cash rate pause once again

The RBA has once again decided to hold the cash rate at 4.35%

What's the key learning?

With inflation proving to be more stubborn than an Android user, the RBA has decided to keep the cash rate on hold for the fourth time in a row. Just a reminder - we’re still sitting at 4.35%.

But this may even be considered a good result for homeowners because there was fear that the RBA might actually increase the cash rate to put more pressure on inflation.

That’s because inflation in the March 2024 quarter was 3.6% – and while that’s a drop from 4.1% in the December quarter, it was higher than the 3.5% economists were predicting.

Now, while the cash rate has remained flat, the cash rate cuts we’ve all been waiting for are looking likely to be delayed.

In fact, CBA and Westpac have updated their predictions. Both banks were predicting multiple cash rate cuts in 2024, and now they’re just expecting one teeny weensy rate cut.

So while we’re safe for now, no one knows what the RBA’s next move will be – probably not even the RBA.

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. 

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 we haven’t felt the full impact of these past successive rises.

And your interest rate on your savings account should increase too (but often doesn’t increase to the same extent).

And why is the cash rate so high at the moment?

As recently as May 2022, interest rates were at a historic low of 0.1% and economic conditions in Australia were pretty stable. 

But with economic slowdown coming out of the pandemic, and  geo-political tensions globally, inflation has skyrocketed. The RBA has gone hardcore with thirteen cash rate increases in the past twenty two months.

Here’s what that’s looked like:

This is the first change to the cash rate we’ve had since November 2023. It’ll be some time before we see what the impact of this cash rate rise will be.

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