Key Points
- The Reserve Bank has chosen to keep the cash rate target at 4.35 per cent.
- The RBA has made 13 rate hikes since May 2022 to try and tackle inflation.
- This was the RBA's final monthly meeting, with meetings set to be held less frequently next year.
The Reserve Bank of Australia (RBA) left rates on hold at 4.35 per cent at its final meeting of the year, in a decision borrowers will welcome in the lead-up to Christmas.
Many economists had expected the central bank would leave the cash rate target unchanged after inflation came in at 4.9 per cent in October, down from 5.6 per cent in September.
Australia's big four banks were among those tipping no change ahead of Tuesday's RBA board meeting.
Source: SBS News
Should we expect another increase next year?
The central bank has been lifting interest rates in a bid to curb inflation, which has been cooling but remains well above its 2 to 3 per cent target range.
In a post-meeting statement, RBA governor Michele Bullock again left the door open to more tightening in coming months.
"Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable time frame will depend upon the data and the evolving assessment of risks," Bullock said.
Since the RBA's November meeting, there's been limited information on the domestic economy, and holding the cash rate steady will allow time to assess the impact of the increases in interest rates on demand, inflation, and the labour market, Bullock explained.
"Domestically, there are uncertainties regarding the lags in the effect of monetary policy and how firms' pricing decisions and wages will respond to the slower growth in the economy at a time when the labour market remains tight.
"The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income," Bullock said.
The December quarter inflation figures are expected to be released on 31 January, just ahead of the RBA board's next meeting in early February.
PropTrack Senior Economist Eleanor Creagh said inflation was likely to continue to cool, but if it did so at a slower pace than the RBA hopes there could be a rate rise in February.
"The RBA has been clear that it has a low tolerance for allowing inflation to return to target more slowly than currently expected," Creagh said.
"This means it’s likely the cash rate has peaked in this current tightening cycle, although should inflation data indicate inflation is returning to target at a slower pace than currently expected the risk of another lift in February 2024 remains."
Next RBA meeting set for February
The pause follows 4.25 percentage points of increases to the cash rate since May last year, which have been pushing up repayments for variable-rate mortgage holders.
Monthly home loan repayments have risen since the May 2022 cash rate rise by an estimated $1,301 per month on a $500,000 loan over 30 years or $2,603 per month on a $1 million loan.
The RBA's first meeting for 2024 is scheduled to start on 5 February, which means borrowers can expect a respite from additional rate increases until at least February.
The next meeting will run across two days, with the decision on interest rates to be announced on the second day.
Tuesday was the RBA's final monthly meeting, with the central bank set to hold meetings less frequently next year.
