HOMEOWNERS with mortgages can breathe a sigh of relief for now, as the Reserve Bank of Australia (RBA) has decided to keep interest rates steady, leaving the target cash rate at 4.35 per cent for the fifth consecutive meeting. This decision, anticipated by many economists for June, means that borrowers won’t see an increase in their monthly payments just yet, although a reduction in rates remains out of reach.
The RBA’s stance on future rate changes remains flexible, with board members opting to stay responsive to new economic data without committing to a specific course of action.
“Inflation is easing but has been doing so more slowly than previously expected and it remains high,” the RBA noted in its post-meeting statement. The board emphasised the importance of staying vigilant to potential inflation risks, acknowledging that the appropriate path for interest rates to ensure inflation returns to the target range remains uncertain.
This decision followed two days of meetings in which board members analysed recent data and assessed the economic impacts of both state and federal budgets, as well as the minimum wage decision made by the workplace umpire.
The RBA began raising interest rates in 2022 as inflation exceeded its 2-3 per cent target range and continued to climb. Since then, the aggressive rate hikes have significantly slowed the economy, reducing demand for goods and services and easing price pressures. Although inflation has decreased from its peak of 7.8 per cent in late 2022, the 3.6 per cent increase recorded in the year to March is still above the target range.
Given the sluggish economic conditions and the gradual easing of price pressures, most economists predict that the next move will likely be a rate cut. A Reuters poll conducted before the latest interest rate decision revealed that 38 out of 43 economists expect no changes in the next quarter, with rate cuts anticipated in the final three months of the year.
