Today the RBA slipped down the chimney and gave us the Christmas present we were all hoping for, and held the cash rate at 4.35%.

And that means we can all enjoy our holidays without the added dose of financial stress this festive season.

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With less than a month until the new year (kind of terrifying I know), there ain’t no better time to look back on how inflation has moved in 2023 and how the RBA has responded.

In May 2022, the RBA first started increasing the cash rate when monthly inflation was 7.2%. 

And in the 20 months since, the cash rate has jumped up 13 times from 0.1% to 4.35%.

In that time, monthly inflation has climbed up to its peak of 8.4% in December 2022 and dropped to its lowest rate of 4.9% in October 2023 (the latest data the ABS has at the moment).

Talk about volatile!

As 2023 wraps up, we’re all biting our nails, wondering when the RBA will put the brakes on these rate hikes?!

Well, there could finally be good news on the cards for mortgage holders. According to the Organisation for Economic Co-operation and Development (OECD), the worst of the cash rate rises is well and truly over.

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Sooo no more cash rate rises in 2024?

The OECD, with their crystal ball, predict that the cash rate will remain at 4.35% until the third quarter of 2024.

From there, they’re predicting cuts of 0.75% till the end of 2025, bringing the cash rate down to 3.6%.

And their forecast is based on the current trajectory of inflation, which is going down.

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And OECD aren’t the only fortune tellers in town. 20 of 29 economists surveyed by Reuters predict that the RBA will hold rates steady until at least the end of March 2024.

The big four banks are also predicting that the RBA is done with its final cash rate rise, and will hold steady at 4.35% until inflation further cools down.

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But wait, there’s a plot twist

With inflation cooling down, it means prices of goods and services will rise slower, and spending will likely decrease.

While that’s the outcome the RBA is looking for, it can often come at the cost of economic growth.

In 2024, economic growth is expected to slow down from 1.9% to 1.4%.

And this doesn’t just go for Australia; economic growth is expected to slow down globally in 2024. And this will be the slowest rate since the pandemic year of 2020.

But but but, it’s not all bad news. Because most economic experts are predicting that despite the slow growth, most parts of the world will dodge the recession-bullet. Phew!

Thankfully, our strong working-age population and an inflow of new migrants will help offset the slowdown in economic growth.

And the unemployment rate which is currently at 3.7% is expected to creep up to 4.4% by mid-2025.

So while 2024 is looking to have some bumps in the road, there is a glow of lights at the end of the tunnel.