Guess who's coming to town ready to steal your Christmas presents! The Reserve Bank of Australia (RBA), that's who!
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This holiday season, despite months of slow inflation, the RBA has decided to keep the cash rate steady at 4.35%.

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All four big banks predicted that the cash rate would remain steady this month, and all four were correct.

But that’s not because they think it should be kept at this rate. In fact, the inflation rate stayed steady at 2.8% in October – which is the lowest annual inflation since July 2021.

But despite these signs that the economy is slowing, the RBA wants to see underlying inflation in the target rate (2% - 3%) consistently before they start to make moves.

What’s the difference between inflation and underlying inflation?

The Australian Bureau of Statistics (ABS) explained that the big drop in the inflation mostly came down to falling petrol and electricity prices. But here’s the catch: power prices only went down because of government rebates at the state and federal levels. Talk about playing the system!

So, the RBA reckon this inflation rate doesn’t really show the bigger picture of what’s happening with inflation over time.

That’s where the "trimmed mean" comes in — also called the underlying inflation rate. Basically, it’s a way to smooth out those one-off or temporary price changes that mess with the true inflation rate.

In their last report, the ABS calculated the trimmed mean by ignoring those electricity rebates. When you take those out of the equation, the underlying inflation rate came in at 3.5%.

And this is one of the main reasons why the RBA has paused on the cash rate once again.

And mortgage holders will have to wait a little longer because the RBA doesn’t meet in January so that’s two more months before the chance of a fall (Feb 17-18th 2025 is the next meeting).
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When will a cash rate drop actually happen?!

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No-one really knows that for sure. It’s like guessing what ugly-sweater Auntie Karen will buy you. So we lean on the insights of economists and banking industrial professionals. Sadly, none of the big four banks reckon it will happen yet..
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ANZ: May
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Commonwealth Bank: February
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NAB: In the June quarter
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Westpac: May
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But even the banks are feeling less hopeful. For example, ANZ and Westpac had previously expects rates to be cut at the RBA's first 2025 meeting in February — but they've pushed that back until the third meeting in May.