Thought seven cash rate pauses was enough?

Well, it looks like the RBA has officially committed to not committing—yet again. For the seventh month in a row, the cash rate is still sitting pretty at 4.35%... and has remained that way since November 2023.

Major SIGH.

The good news is that quarterly inflation dropped below 3% for the first time since 2021. That means it’s within the RBA’s target range of 2-3%. But wants to see inflation in the target rate consistently before they start to make moves.

In particular, the RBA is concerned that the drop in inflation is largely due to government measures like energy rebates and rent relief.

That’s because the trimmed mean inflation, which takes out irregularities or temporary price changes, was actually 3.5% for the September quarter.

Which is why the RBA’s decision didn’t come as a surprise, as all four major banks predicted the RBA would hold the cash rate and will continue to hold it until at least February 2025.

So if the number, 4.35% has been haunting you in your sleep, you’re not alone. 

But the pressure is mounting on the RBA to give homeowners what they’ve been anxiously waiting for sooner rather than later.

Remind me, what happens when interest rates rise?

When the RBA increases the cash rate, the banks will almost always follow suit and raise the interest rate on your loan. 

Experts say it takes around two or three months for individuals to feel the full impact of a rate rise on their cash flow… so we haven’t felt the full impact of these past successive rises.

And your interest rate on your savings account should increase too (but often doesn’t increase to the same extent).

And why is the cash rate so high at the moment?

Back in May 2022, interest rates were at a historic low of 0.1% and economic conditions in Australia were pretty stable. But with economic slowdown coming out of the pandemic, and  geo-political tensions globally, inflation has skyrocketed. The RBA has gone hardcore with thirteen cash rate increases in the past twenty two months.

Here’s what that’s looked like:

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