RBA delivers September cash rate decision

When Will Interest Rates Drop? Key Insights after Today's RBA Meeting

As mortgage holders awaited news, the Reserve Bank of Australia (RBA) announced its September cash rate decision. Many were hopeful for a cut, but experts suggested that may still be some time away.

Current Cash Rate

The cash rate target is set at 4.35%, a figure that influences what banks charge for loans. However, a change in the cash rate doesn't guarantee an immediate shift in mortgage rates; that decision rests with the banks, which typically announce any changes afterward.

Will Rates Be Cut Today?

Most economists believe the RBA will maintain the rate at 4.35%. According to AMP's deputy chief economist Diana Mousina, recent economic data indicates:

Slowing wage growth

Stable job growth

An unemployment rate of 4.2%

Weak economic growth in Q2

Expected moderation in inflation

Low consumer and business confidence

"This backdrop aligns with the RBA's forecasts, suggesting no immediate need for a rate cut," Mousina notes. Robert Carnell, ING Bank's Asia-Pacific research head, concurs, stating that easing is unlikely at this meeting.

Rate Cut Predictions

While households grapple with rising living costs, the prospect of a rate cut remains uncertain. Current predictions from major banks include:

ANZ: February

CBA: December

NAB: May

Westpac: March

RBA Governor Michele Bullock has also indicated that it's too soon to anticipate cuts, stating, “Circumstances may change, but the board will respond accordingly.”

This RBA meeting follows a recent 0.5% cut by the US Federal Reserve, leading some to speculate about potential cuts in Australia.

What Would Trigger a Rate Cut?

A primary condition for a rate cut is lower inflation, with the RBA aiming for a target range of 2-3%. Australia's inflation rate was recorded at 3.8% for the June quarter, up from 3.6% in March. The RBA has acknowledged that underlying inflation remains high, indicating that sustainable movement towards the target range is still some time away.

Cash Rate Overview

The cash rate has been at 4.35% for ten months, having been raised in November last year. Despite six meetings since then, the RBA has opted to keep it steady.

Historical Context

The last time the cash rate was above 4.35% was in November 2011, when it reached 4.5%.

Upcoming RBA Meetings

There are two more RBA meetings scheduled for this year:

November 4-5

December 9-10

Stay tuned for updates from today’s RBA announcement!