Reserve Bank Keeps Interest Rate Frozen at 4.35%! Borrowers Desperate for Relief!

The Bank is concerned about inflation, which is still higher than desired, although it’s slowing down more gradually than expected. Figuring out the right interest rate to control inflation without hurting economic growth is tricky and uncertain.

Since May 2022, when the RBA started raising rates, people with typical $600,000 home loans have seen their monthly payments increase by about $1,450. Despite economic growth almost stalling earlier this year, strong employment numbers have helped families deal with rising living costs.

Target Cash Rate – RBA

Looking ahead, tax cuts and energy rebates starting on July 1st aim to ease financial pressure. However, the Bank is cautious about people spending too much, which could lead to further rate hikes instead of cuts.

The market reacted mildly, with slight gains in the Australian dollar and brief fluctuations in stock prices after the announcement. The RBA continues to balance economic demands, noting persistent high demand and increased domestic costs.

RBA Governor Michele Bullock acknowledged discussions about potentially raising rates, emphasizing their goal to gradually bring inflation back within target by late 2025 without causing a recession.

While other global central banks like Switzerland, Canada, and Europe have cut rates, Australia’s economic conditions suggest it’s not yet ready to follow suit. Analysts predict a possible rate cut in early 2025, considering easing labor market conditions and recent declines in household savings and spending.

In summary, the RBA’s decision shows cautious optimism amid ongoing economic challenges, aiming for balanced growth while addressing inflation pressures.